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Bear of the Day: Townsquare Media (TSQ)


Townsquare Media (TSQ) is an entertainment and digital marketing solutions company that owns and operates radio, digital, and live event properties in small and mid-sized markets across the U.S.

They own 317 radio stations including WYRK, KLAQ, K2, and NJ101.5, over 325 local websites, and music festivals such as Mountain Jam, WE Fest, and the Taste of Country Music Festival.

Townsquare also has entertainment events like the America on Tap craft beer festival series and the Insane Inflatable 5K obstacle race series in its portfolio.

Sitting at a Zacks Rank #5 (Strong Sell), the company was hit hard recently by challenges in one of its smaller business segments, which negatively impacted its performance.

Lackluster Third Quarter Earnings

Back in November, Townsquare reported lackluster results for its fiscal 2017 third quarter.

Earnings of 51 cents per share missed the Zacks Consensus of 61 cents per share and represented a negative surprise of 16.4%. Net income decreased 9.9% to $14.3 million.

Total revenues came in at $164 million, also missing our consensus estimate and falling just 1% year-over-year.

Breaking it down by segment, Local Marketing Solutions revenues, which is the core of TSQ’s business according to co-CEO Dhruv Prasad, grew 1.7% to $257 million. Entertainment revenues, however, fell 4.1% to $136.2 million thanks in part to revenue declines in the company’s live events business.

Adjusted EBITDA also decreased 11.1%.

Earnings Estimates Lowered

Townsquare’s earnings growth trajectory has taken a hit lately, with analysts becoming more bearish on the media company.

For the current quarter, Zacks expects TSQ’s earnings to decline about 31.6%; the consensus has fallen just two cents, from $0.15 to $0.13 per share, in the last 60 days.

Earnings are also expected to fall nearly 30% for the current fiscal year, and two analysts have revised their estimates downward in the last 60 days.

However, fiscal 2018 could be a big turnaround moment for Townsquare, as the company is anticipating nearly 40% earnings growth; the current consensus, though, has dipped from $1.04 to $1.02 over the past two months.

Can Shares Rebound?

Shares of Townsquare plunged well over 24% in the past one-year period.

Townsquare Media, Inc. Price, Consensus and EPS Surprise

Townsquare Media, Inc. Price, Consensus and EPS Surprise | Townsquare Media, Inc. Quote

TSQ currently trades at a forward P/E of 7.6.

Last quarter presented unique hurdles for Townsquare, as its Entertainment segment offset any strong results from its Local Marketing Solutions segment, which includes Townsquare Interactive, its digital marketing solutions business, and Townsquare Ignite, its programmatic digital advertising platform

If management can successfully implement initiatives from its recent strategic review of its Entertainment business, Townsquare has the chance to get back on track.

For investors looking for media stock with more near-term potential, they should consider AMC Networks (AMCX), a Zacks Rank #2 (Buy) stock that anticipates earnings growth of more than 22% for its current fiscal year.

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