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Scripps Networks Interactive Shares Attractively Priced, Says Argus

Scripps Networks Interactive Shares Attractively Priced, Says Argus

Argus maintains its Buy rating and $100 price target on Scripps Networks Interactive, Inc. (NASDAQ: SNI), saying the company benefits from ratings growth in a strong scatter advertising market.

The brokerage noted that HGTV and the Food Network remain key growth drivers, as the company expands internationally, and in the digital and subscription video-on-demand markets.

Scripps Networks' second-quarter EPS beat the consensus estimate by $0.08. Revenue rose 22 percent to $893 million, driven by contributions from the Polish network TVN, acquired in September 2015, and strong advertising revenue growth.

Consolidations In The Cable Space

However, investors focused on the 3.6 drop in U.S. affiliate revenue due to rate equalization by newly consolidated cable distributors. Argus said the cable company rate equalization had been expected after the consolidations of AT&T Inc. (NYSE: T) with DirecTV and Charter Communications, Inc. (NASDAQ: CHTR) with Time Warner Cable and Brighthouse.

Related Link: Stifel Upgrades Scripps To Buy, Sets $75 Price Target

What That Means For Scripps

The company expects cable rates to return to more normal mid- to high-single-digit growth in 2017 and beyond. Scripps' shares fell 7 percent after the release of second-quarter results, although they have already recovered half of this lost ground.

"SNI is attractively priced relative to peers, and its 15.5 percent return on invested capital far outpaces the returns of competitors," analyst Joseph Bonner wrote in a note.

Bonner, however, cut his 2016 EPS estimate by a penny to $5.18 and 2017 forecast to $5.43 from $5.51.

At time of writing, shares of Scripps Networks were down 0.64 percent to $63.67. The $100 price target represents a potential upside of 56 percent over Monday's close of $64.08.

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Latest Ratings for SNI

Aug 2017Morgan StanleyMaintainsEqual-Weight
Aug 2017NeedhamDowngradesBuyHold
Aug 2017ArgusDowngradesBuyHold

View More Analyst Ratings for SNI
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