Wells Fargo Sees Significant Upside in Nexstar (NXST) Following MEG Financing; Valuation Range Raised to $75-$96

September 28, 2016 7:17 AM EDT
Get Alerts NXST Hot Sheet
Price: $65.35 --0%

Rating Summary:
    9 Buy, 1 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 12 | Down: 18 | New: 4
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Wells Fargo analyst Marci Ryvicker reiterated an Outperform rating and lifted her valuation range on Nexstar Broadcasting Group (NASDAQ: NXST) to $75-96 from $65-67, saying they believe there is still so much potential upside to this post the Media General (NYSE: MEG) financing.

Ryvicker commented, "Last night, NXST finally priced the rest of the MEG-related financing, which came in at LIBOR +3.00% (0.0% floor), which was pretty much as expected. Mgmt. also essentially raised its PF FCF guide by $40MM, or $0.85/share, which was also relatively in line. Now it's time to focus on what this New Co. could look like post close - and we really like what we see. From a high level, we could have a company that is right at the 39% cap (although this could be lower depending on the auction) and levered just about 4x by year-end 2017, which means there could be PLENTY OF CASH for dividends (we could see anywhere from a 4-6% yield by year-end 2017) and/ or buybacks ($1B over a 3-year period maybe?). We also think there could be anywhere from $25-50MM of incremental operating synergies, which would add another $0.28-$0.67 to our base case PF FCF estimate of $12/share. Based on the various sensitivity analyses we discuss in this note, we believe that PF NXST-MEG is worth anywhere from $75-96/share, which represents potential upside of 40-80% from today's close."

The firm is not changing FY16, FY17 EPS estimates of $3.96/$2.67 at this time.

For an analyst ratings summary and ratings history on Nexstar Broadcasting Group click here. For more ratings news on Nexstar Broadcasting Group click here.

Shares of Nexstar Broadcasting Group closed at $53.50 yesterday.



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