Sinclair’s Political Shooting Through The Roof

After reporting 2Q political ad revenues that were nearly triple company guidance, Sinclair Broadcast Group is telling Wall Street to expect an even bigger haul in the third quarter. And the records set this year could be toppled in future elections.

“We are dealing at never-before-seen levels. Including [recently acquired] Four Points and Freedom, when you compare this election to the 2008 presidential race, political is expected to be up 85% through the third quarter and we believe that we will exceed the $34 million of political reported in the fourth quarter of 2008, including the acquisitions,” Steve Marks, COO-television, told analysts this morning.

Yes, that 85% number is a same-station number, Sinclair management confirmed later in the conference call, when one analyst checked to be sure. The current Sinclair group is projected to see political ad revenues for 2012 rise 85% from what Sinclair-Freedom-Four Points booked in 2008.

For the current quarter, Sinclair is expecting $18.5 million to $23.5 million in political advertising. That’s well above the $11.8 million that Wells Fargo Securities analyst Marci Ryvicker had been projecting. Likewise, the company’s guidance of $223.1 million to $228.1 million in total revenue for 3Q is well ahead of her $208.8 million estimate.

Including political and retrans, Sinclair is projecting that 3Q same-station revenues (excluding acquisitions) will be up 14.8% to 18.1%. Excluding political, that growth is projected at 8%.

No matter how much political advertising rises this year, Sinclair’s top executive sees it as a floor to build from, not a ceiling.

“I just think that something that continues to be lost on the investment community in general is the notion that the political business as a business is an ever-expanding business. Just like retrans is,” said David Smith, president-CEO, Sinclair. “I don’t see any evidence that it’s ever going to go away. The notion of a potential third party in the country, called the Tea Party or whatever they want to refer to themselves as, and various political action committees, are just going to continue to drive this platform on a going-forward basis.”

“I just don’t see anything that’s going to stop that, unless for some reason we become the panacea place in the world and everybody goes to sleep and everybody loves everybody. That’s not happening anytime soon. In a political sense, it’s just going to keep getting bigger and bigger. It has to,” Smith said.

Smith and other company execs lamented the valuation that Wall Street is placing on Sinclair’s stock, as well as those of other TV station owners, which are at multiples below those of recent private market station sales. (Sinclair’s stock did jump today after the company reported its 2Q results and boosted its cash dividend by 25%.)

Despite lots of new competition from online and mobile upstarts, TV is back to growing ad revenue and adding new revenue streams, such as retransmission consent. Smith had a concise answer when one analyst asked about the threat to broadcasters from Dish Network’s Auto Hop service to skip ads.

“I don’t put much stock in these technologies, but my simple answer to that is that if they want to cut our commercials then we’re going to raise our retransmission rates,” Smith said. “Nothing tricky.”