E.W. Scripps (SSP)

Media, broadcasting, and digital services company E.W. Scripps (NASDAQ:SSP) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales fell by 6.6% year on year to $524.4 million. Its GAAP loss of $0.22 per share was 26.7% above analysts’ consensus estimates.

Company Overview

Founded as a chain of daily newspapers, E.W. Scripps (NASDAQ:SSP) is a diversified media enterprise operating a range of local television stations, national networks, and digital media platforms.

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.

Competitors in the local television broadcasting and digital media sector include Nexstar Media (NASDAQ:NXST), Sinclair (NASDAQ:SBGI), and TEGNA (NYSE:TGNA).

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, E.W. Scripps grew its sales at a 10.7% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. E.W. Scripps’s recent performance shows its demand has slowed as its annualized revenue growth of 1.2% over the last two years was below its five-year trend.

This quarter, E.W. Scripps’s revenue fell by 6.6% year on year to $524.4 million but beat Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to decline by 13% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

E.W. Scripps’s operating margin has risen over the last 12 months, but it still averaged negative 6.9% over the last two years. This is due to its large expense base and inefficient cost structure.

This quarter, E.W. Scripps generated an operating profit margin of 5.2%, down 2.5 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.

E.W. Scripps’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q1, E.W. Scripps reported EPS at negative $0.22, down from negative $0.15 in the same quarter last year. Despite falling year on year, this print easily cleared analysts’ estimates. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

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.

E.W. Scripps has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.1%, subpar for a consumer discretionary business.

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).

E.W. Scripps historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

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, E.W. Scripps’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

E.W. Scripps reported $23.96 million of cash and $2.6 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $581.8 million of EBITDA over the last 12 months, we view E.W. Scripps’s 4.4× net-debt-to-EBITDA ratio as safe. We also see its $111.7 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing E.W. Scripps beat analysts’ revenue, EPS, and EBITDA expectations this quarter. Zooming out, we think this quarter featured some important positives. The stock remained flat at $2.60 immediately after reporting.

Updated: May 18, 2025 at 10:45 PM EDT

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in E.W. Scripps.

E.W. Scripps falls short of our quality standards. For starters, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its Forecasted free cash flow margin suggests the company will ramp up its investments next year. On top of that, its projected EPS for the next year is lacking.

E.W. Scripps’s EV-to-EBITDA ratio based on the next 12 months is 0.8x. This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $5.58 on the company (compared to the current share price of $2.33).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

To get the best start with StockStory, check out our most recent stock picks, and then sign up for our earnings alerts by adding companies to your watchlist. We typically have quarterly earnings results analyzed within seconds of the data being released, giving investors the chance to react before the market has fully absorbed the information. This is especially true for companies reporting pre-market.