Gray Television Network (GTN:BUY) We expect Gray TV will be the beneficiary of political advertising revenue with large upside in the 2016 presidential election

2-MAR-16 – Gray Television Network (GTN:BUY) We expect Gray TV will be the beneficiary of political advertising revenue with large upside in the 2016 presidential election year. Maintaining BUY rating and $22 price target.

Q4:15 HIGHLIGHTS

  • Gray Television, GTN, beat our top and bottom line estimates in Q4:15 results.
  • For the quarter, Gray achieved revenue of $169.5 million beating our estimate of $168.0 million. Revenues for 4Q:15 fell nearly 5% but included record retransmission consent revenue of $39.5 million. In an off-election year, political revenue had a tough comp with $9.2 million in revenues, down 81% from the prior $48.5 million.
  • For the quarter, broadcast cash flow was $0.40 per share or $67.8 million. Net income was $0.21 per share for the quarter beating our estimate of $0.19.
  • We do not expect significant acquisition activity for 2016. Over the past 28 months Gray has transformed into a company with significant scale, a high quality portfolio, excellent financial results, and a much stronger balance sheet. As a result Gray does not have a need to acquire more television stations.
  • 2016 presents Gray TV with many opportunities. Locally, many of its stations are spending a good amount of time filling orders from election campaigns, interest groups, and super pacs. Gray TV operates in most presidential swing states and many other contested markets and operate the number one or number two ranked television stations in every one of those markets.
  • We forecast EPS of $1.74 in 2016. We continue to maintain a BUY rating and a price target of $22.00.

RISKS

  • GTN has debt. The principal and interest payment obligations on such debt may restrict future operations and impair the ability to meet long-term obligations.
  • Dependence upon a limited number of advertising categories could adversely affect the business.

The Female Health Company (FHCO:BUY) Strong growth potential for the company’s products and highly unsaturated market augurs well for the long term prospects

11-FEB-15- The Female Health Company (FHCO:BUY) Strong growth potential for the company’s products and highly unsaturated market augurs well for the long term prospects of the company. The company has an asset light business model with a strong balance sheet. We reiterate our BUY rating while reducing our price target to $5.40 from $7.50 based on our updated DCF model.

Q1:15 NOTES

  • The company sold 12.2 million condoms in Q1:15, as compared to 11.8 million in Q1:14.
  • Operating expenses increased 13 percent to $2,365,824 for the three months ended December 31, 2014, compared with $2,094,858 in the prior-year period.
  • The Company recorded income tax expense for Q1:15 of $670,430, an increase of $571,555 from the same period last year.
  • The Company’s net income decreased 45% to $804,917 in Q1:14, compared with net income of $1,464,603 in the same period of the prior year.
  • The company received an order for 25.0 million condoms in Q1:15 from the Brazilian government, most of which will be delivered in Q2:15.
  • We reiterate our BUY rating while reducing our price target to $5.40.

RISKS

  • The company does a significant amount of business abroad, and is exposed to foreign currency risk.
  • Currently, the company is dependent on just 3 customers for a majority of its sales.