Local television broadcasting and media company Gray Television (NYSE:GTN) missed analysts' expectations in Q2 CY2024, with revenue up 1.6% year on year to $826 million. Next quarter's revenue guidance of $967 million also underwhelmed, coming in 3.3% below analysts' estimates. It made a GAAP profit of $0.09 per share, improving from its loss of $0.10 per share in the same quarter last year.
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Gray Television (GTN) Q2 CY2024 Highlights:
- Revenue: $826 million vs analyst estimates of $840.3 million (1.7% miss)
- EPS: $0.09 vs analyst estimates of $0.05 ($0.04 beat)
- Revenue Guidance for Q3 CY2024 is $967 million at the midpoint, below analyst estimates of $1 billion
- Gross Margin (GAAP): 29.9%, in line with the same quarter last year
- EBITDA Margin: 27.2%, in line with the same quarter last year
- Market Capitalization: $522.2 million
Specializing in local media coverage, Gray Television (NYSE:GTN) is a broadcast company supplying digital media to various markets in the United States.
Broadcasting
Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.
Sales Growth
Reviewing a company's long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one tends to sustain growth for years. Thankfully, Gray Television's 15.2% annualized revenue growth over the last five years was decent. This shows it was successful in expanding, a useful starting point for our analysis. 
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Gray Television's recent history shows its demand slowed as its annualized revenue growth of 4.8% over the last two years is below its five-year trend.
Gray Television also breaks out the revenue for its most important segments, Retransmission and Advertising, which are 45.2% and 44.9% of revenue. Over the last two years, Gray Television's Retransmission revenue (affiliate and licensing fees) averaged 7.4% year-on-year growth while its Advertising revenue (marketing services) averaged 5.4% growth.
This quarter, Gray Television's revenue grew 1.6% year on year to $826 million, falling short of Wall Street's estimates. The company is guiding for revenue to rise 20.4% year on year to $967 million next quarter, improving from the 11.7% year-on-year decrease it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 15.1% over the next 12 months, an acceleration from this quarter.
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Operating Margin
Gray Television's operating margin has been trending down over the last year, but it still averaged 18.3%, top-notch for a consumer discretionary business. This shows it's an efficient company that manages its expenses effectively.
This quarter, Gray Television generated an operating profit margin of 18.4%, up 3.8 percentage points year on year. This increase was a welcome development and shows it was recently more efficient because its expenses grew slower than its revenue.
Key Takeaways from Gray Television's Q2 Results
We were impressed by how significantly Gray Television blew past analysts' EPS expectations this quarter. On the other hand, its revenue fell short of Wall Street's estimates as its Retransmission business underperformed. This quarter featured some positives but could have been better. The stock remained flat at $5.26 immediately following the results.
So should you invest in Gray Television right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.