Wedbush analyst, James Dix, believes shares of Sinclair Broadcasting (NASDAQ: SBGI) should continue to recover after a low 1Q guide. The key driver is likely a rise in 2016/17 FCF/share estimates from acquisitions and taxes. PT drops to $37 from $39 on a lower multiple.

SBGI expects net retransmission revenue to grow high teens in 2016, low teens in 2017 and single digits in 2018, with Comcast set for renewal in July, and Charter the main 2017 renewal (in 2Q), as well as network renewals with a few FOX and NBC affiliates now on short-term extensions, and the next major renewals at YE2017 (FOX and Allbritton-legacy ABCs). SBGI sees 2016/17 average FCF/share of $5.13-5.52 (WSe to $6.03 from $5.57 for 2016; $4.20 for 2017; PF avg. $5.23).

1Q outlook is for similar LSD core ad growth (with 13 of 15 verticals pacing up) expolitical ($16-18m vs. $2m LY) and ex-Super Bowl ($4.5m vs. $1.6m LY). Core ads are likely to be flat in 2H. 2015 ad revenue by programming was ~30% news, 29% network, 29% syndicated, 8% sports and 4% paid. 2016 incremental expense is roughly $140m, ~$40m for new initiatives and the balance for acquisitions (with Tennis Channel and Lincoln to close in March). Key drivers for Tennis are distribution beyond the 50m homes recently negotiated and higher advertising.

Problems with the quarter center on: 1) ad growth being neither weak nor strong, and 2) expense visibility and payoff. With digital advertising +23% and core all-in +2% in 4Q (at low end of prior LSD-MSD pace) - and +19% and +1%.

The 12-month price target is $37 on ~6x FCF/share on core operations, assuming ~$700m in spectrum auction proceeds.

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Shares of Sinclair Broadcasting closed at $29.46 yesterday.