Sinclair (SBGI)

Media broadcasting company Sinclair (NASDAQ:SBGI) reported Q3 CY2025 results exceeding the market’s revenue expectations, but sales fell by 15.7% year on year to $773 million. Guidance for next quarter’s revenue was better than expected at $833 million at the midpoint, 1.6% above analysts’ estimates. Its GAAP loss of $0.02 per share was 97.6% above analysts’ consensus estimates.

Company Overview

With over 2,400 hours of local news produced weekly and 640 broadcast channels reaching millions of American homes, Sinclair (NASDAQ:SBGI) operates a network of 185 local television stations across 86 U.S. markets, producing news programming and distributing content from major networks.

The sector faces structural headwinds from declining linear TV viewership, shifts in advertising spend toward digital platforms, and ongoing challenges in monetizing print and broadcast content. However, for companies that invest wisely, tailwinds can include AI, the power of which can result in more personalized content creation and more detailed audience analysis. These can create a flywheel of success where one feeds into the other. Still there are outstanding questions around AI-generated content oversight, and the regulatory framework around this could evolve in unseen ways over the next few years.

Sinclair competes with other broadcast television groups like Nexstar Media Group (NASDAQ:NXST), Gray Television (NYSE:GTN), and TEGNA (NYSE:TGNA), as well as with larger media conglomerates such as Comcast (NASDAQ:CMCSA) and Paramount Global (NASDAQ:PARA) that own local stations.

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $3.34 billion in revenue over the past 12 months, Sinclair is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.

As you can see below, Sinclair’s demand was weak over the last five years. Its sales fell by 11.2% annually, a rough starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Sinclair’s annualized revenue growth of 1.1% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, Sinclair’s revenue fell by 15.7% year on year to $773 million but beat Wall Street’s estimates by 0.6%. Company management is currently guiding for a 17% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 1.7% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.

Sinclair has been a well-oiled machine over the last five years. It demonstrated elite profitability for a business services business, boasting an average operating margin of 24.3%.

Looking at the trend in its profitability, Sinclair’s operating margin rose by 1.8 percentage points over the last five years, showing its efficiency has improved.

In Q3, Sinclair generated an operating margin profit margin of 7.5%, down 12 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although Sinclair’s full-year earnings are still negative, it reduced its losses and improved its EPS by 56.2% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Sadly for Sinclair, its EPS declined by 57.3% annually over the last two years while its revenue grew by 1.1%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Sinclair’s earnings can give us a better understanding of its performance. A two-year view shows Sinclair has diluted its shareholders, growing its share count by 10%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings.

In Q3, Sinclair reported EPS of negative $0.02, down from $1.43 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. Over the next 12 months, Wall Street expects Sinclair to perform poorly. Analysts forecast its full-year EPS of negative $0.62 will tumble to negative $1.54.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Sinclair has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 13.4% over the last five years.

Taking a step back, we can see that Sinclair’s margin dropped by 5.5 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Sinclair’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 15.7%, slightly better than typical business services business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Sinclair’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Sinclair’s $4.10 billion of debt exceeds the $370 million of cash on its balance sheet. Furthermore, its 6× net-debt-to-EBITDA ratio (based on its EBITDA of $638 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Sinclair could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Sinclair can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

It was good to see Sinclair beat analysts’ EPS expectations this quarter. We were also glad its full-year revenue guidance trumped Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 4.8% to $14.30 immediately after reporting.

Updated: December 3, 2025 at 10:06 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own Sinclair, you should also grasp the company’s longer-term business quality and valuation.

We see the value of companies helping their customers, but in the case of Sinclair, we’re out. For starters, its revenue has declined over the last five years. And while its impressive operating margins show it has a highly efficient business model, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its projected EPS for the next year is lacking.

Sinclair’s EV-to-EBITDA ratio based on the next 12 months is 1.9x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $16.93 on the company (compared to the current share price of $15.16).