Executive Summary / Key Takeaways

• The Local Broadcasting Moat Reinvented: Nexstar has built America's largest local TV station portfolio (200+ stations) as a defensive fortress generating 40% of revenue from highly profitable retransmission fees, but the real story is how management is repurposing this moat into offensive weapons through CW sports, NewsNation cable news, and ATSC 3.0 spectrum monetization.

• Financial Resilience Through Cyclicality: While Q3 2025 broadcast revenue fell 12.7% in a non-election year, non-political advertising held "essentially flat" against expectations of decline, and distribution revenue stability demonstrates the moat's durability. The company generated $1.1 billion in trailing free cash flow while returning capital and funding transformational acquisitions.

• CW Network's Path to Profitability: The strategic pivot from scripted entertainment to live sports (40% of programming hours) has delivered six consecutive quarters of primetime ratings growth and reduced losses by 24% year-over-year in Q3, with management targeting breakeven in 2026—a critical inflection point that could re-rate the entire business.

• TEGNA (TGNA) Acquisition as a Force Multiplier: The pending $6.2 billion acquisition would add 64 stations in key markets, create $300 million in synergies, and be 40% accretive to free cash flow, but faces regulatory scrutiny that represents the single largest risk to the investment thesis.

• ATSC 3.0: The Embedded Optionality: Nexstar's Edge Beam Wireless Consortium controls spectrum covering 97% of the U.S. with potential applications in connected cars, digital signage, and a GPS backup system, representing what management calls the "biggest value creation lever" despite meaningful revenue not expected until 2028.

Setting the Scene: The Architecture of a Local Media Empire

Nexstar Media Group, founded in 1996, has spent nearly three decades executing a deliberate strategy to consolidate local television broadcasting in an era of fragmentation. The company owns, operates, or provides services to 201 full-power television stations across 116 markets in 40 states and Washington D.C., making it the largest station owner in the United States. This scale creates a fundamental competitive advantage: Nexstar is a top-three affiliate group for each major broadcast network (ABC, CBS, FOX, NBC), giving it unparalleled negotiating leverage with both content providers and distribution partners.

The industry structure is built on a simple but powerful economic model. Local stations produce high-margin local news that commands viewer trust and political advertising dollars, while network affiliation agreements provide premium national content. The real financial engine, however, is retransmission consent—fees paid by cable, satellite, and virtual MVPDs to carry local stations. These fees account for approximately 40% of industry revenue and represent a recurring, high-margin revenue stream that scales with subscriber counts and rate escalators. Nexstar's 1,500 local salespeople maintain relationships with 40,000 advertisers, creating a "local revenue moat" that national platforms cannot easily replicate.

This positioning emerged from a calculated consolidation wave that began around 2011, when Nexstar's stock traded at $4.55 per share. The $4.6 billion Media General acquisition in 2017 and $7.2 billion Tribune Media deal in 2019 transformed the company's scale and geographic reach. The Tribune acquisition also brought WGN America, which Nexstar strategically converted from entertainment to NewsNation, a national cable news network focused on unbiased reporting. This transformation exemplifies management's ability to repurpose assets for higher-value uses—a skill that now animates the entire corporate strategy.

Technology, Products, and Strategic Differentiation: Beyond Linear TV

The CW Network's Sports Transformation

The most significant strategic pivot is Nexstar's overhaul of The CW network, which it acquired majority control of in 2022. Management recognized that scripted entertainment was losing relevance in an on-demand world, so they fundamentally restructured the programming mix. Sports content now accounts for 40% of total programming hours, including NASCAR Xfinity Series, WWE NXT, college football, and professional bull riding. This shift matters because live sports is the last bastion of appointment viewing in an era of time-shifted consumption.

The results validate the strategy. The CW achieved six consecutive quarters of primetime ratings growth as of Q3 2025, surpassing Big Four network telecasts 250 times year-to-date versus only 45 times in all of 2024. NASCAR Xfinity Series viewership increased 11% year-over-year, with 20 races exceeding 1 million viewers compared to just eight in 2024. WWE NXT viewership is up 12% year-to-date, enjoying its most broadly viewed quarter in five years. These metrics translate directly to financial performance: CW losses decreased $5 million (24%) in Q3, and management projects 2025 losses will be 25% lower than 2024, with breakeven targeted for 2026. This trajectory transforms The CW from a drag on earnings into a potential profit engine.

NewsNation's Cable News Disruption

NewsNation represents another asset repurposing success. Launched from the bones of WGN America, the network ranked as the #1 basic cable network for year-over-year growth in Q3 2025, continuing a trend from Q2. Year-to-date, NewsNation surpassed MSNBC 57 times and CNN 39 times in head-to-head telecasts across total viewers and the adult 25-54 demographic—a dramatic increase from just 4 and 2 times respectively in 2024. The network was added to the White House press pool in Q1 2025, cementing its credibility.

While management doesn't break out NewsNation's financials separately, its strategic value extends beyond direct profits. The network provides a national platform for Nexstar's 113 local newsrooms, creating a unique local-national content flywheel. During hurricanes in Florida and North Carolina, and wildfires in Los Angeles, local stations provided ground-level coverage while NewsNation delivered comprehensive national reporting. This synergy enhances both local station value and national network relevance, creating differentiation that pure-play cable networks cannot match.

ATSC 3.0: The Spectrum Monetization Engine

The Edge Beam Wireless Consortium, announced in January 2025, consolidates ATSC 3.0 spectrum assets from Nexstar, Scripps (SSP), Gray Media (GTN), and Sinclair (SBGI). This joint venture controls spectrum covering over 97% of the continental U.S. and more than seven billion megahertz pops. Management describes this as the "next big frontier" and the "biggest value creation lever" for non-video spectrum uses.

The consortium signed its first paying customer in digital signage in 2024, demonstrating proof of concept. More significantly, the automotive sector has expressed interest in connected car applications, over-the-air software updates, and in-vehicle video services. Perhaps most intriguing is the Broadcast Positioning System (BPS) , a terrestrial backup to GPS that could serve national security interests. The Department of Transportation and Department of Defense have both indicated it's in the national interest to have a GPS backup, and Nexstar's terrestrial system would be less vulnerable to disruption than a second satellite-based system.

Regulatory clarity is essential. The NAB's petition for rulemaking proposes a two-phase transition: top-55 markets completing ATSC 3.0 transition by February 2028, with remaining stations by February 2030. Management expects meaningful revenue progress around 2028 if this timeline holds. This represents a long-dated but potentially massive optionality that the market currently assigns little value.

Financial Performance & Segment Dynamics: Evidence of Strategic Execution

Broadcast Segment Resilience

The Reportable Broadcast Segment generated $1.131 billion in Q3 2025 revenue, down 12.7% year-over-year, entirely attributable to the political advertising cycle. In election-year Q3 2024, political advertising contributed $145 million; in 2025's non-election year, it contributed only $10 million. However, the underlying health of the business is stronger than the headline suggests.

Non-political advertising revenue was "essentially flat" in Q3, beating management's expectation of a low single-digit decline. This performance was driven by growth in national advertising (including The CW and NewsNation), strong local digital advertising growth, and the absence of political crowd-out that depressed Q3 2024. Distribution revenue decreased only $10 million despite ongoing MVPD subscriber attrition, as annual rate escalators, vMVPD subscriber growth, and new CW affiliations offset most losses. Excluding a nonrecurring legacy customer dispute, distribution revenue would have been slightly up.

Segment profit margins remain robust at 33.4% in Q3 ($377 million profit on $1.131 billion revenue), demonstrating the operating leverage inherent in Nexstar's scaled infrastructure. A strategic operational restructuring implemented in Q4 2024 is expected to generate low-to-mid eight figures in operating expense savings during 2025, providing additional margin support.

The CW's Loss Reduction Trajectory

The CW Network's financial improvement is accelerating. Q3 2025 losses decreased $5 million (24%) year-over-year, driven by higher distribution and advertising revenue offsetting lower licensing revenue and reduced operating expenses. For the first half of 2025, CW profitability improved by $21 million year-over-year due to reduced broadcast rights amortization and lower operating expenses following the Q4 2024 restructuring.

Management's guidance is explicit: 2025 CW losses will be approximately 25% lower than 2024, with breakeven expected sometime in 2026. This timeline is credible given the track record—CW cash flow improved $127 million in 2024, exceeding the $100 million goal and reducing 2023 losses by roughly 50%. The network will feature approximately 400 hours of sports programming in 2025, representing 40% of total hours, a dramatic shift from zero sports under prior ownership.

Digital and National Assets

Local digital advertising demonstrated strong growth in Q3, continuing a trend of mid-single-digit overall digital growth with local businesses growing at a higher rate. This matters because it shows Nexstar can compete for digital ad dollars despite its linear TV heritage. The company's 125 local websites, 229 mobile apps, and 72 connected TV applications create a digital footprint that extends the reach of broadcast content.

NewsNation's growth is accelerating, but its financial contribution remains opaque. The network's #1 ranking in year-over-year cable growth and addition to the White House press pool suggest increasing value, though likely still modest profits. The strategic value exceeds direct earnings, as it provides national reach for local content and diversifies Nexstar beyond pure local broadcasting.

The TV Food Network investment shows signs of pressure. Nexstar's 31.3% stake generated $6 million in cash distributions in Q3, down from $5 million in Q3 2024, while recognized net income fell to $23 million from $36 million. Management attributes this to lower revenue and intends to renew the partnership agreement before its December 31, 2025 dissolution date. This asset provides cash flow but faces the same cord-cutting headwinds as other cable networks.

Balance Sheet and Capital Allocation

Nexstar's balance sheet reflects its acquisition-heavy strategy. Total outstanding debt stands at $6.4 billion, representing 73.6% of combined capitalization. However, the company refinanced its senior secured credit facilities in June 2025, extending maturities to June 2030 for revolvers and Term Loan A, and June 2032 for Term Loan B. This creates long-term financing stability.

The net first lien leverage ratio was 1.73x as of September 30, well below the 4.25x covenant (which can increase to 4.75x for material transactions). This headroom provides flexibility for the TEGNA (TGNA) acquisition. The company repaid $157 million of debt during the first nine months of 2025 and has $586 million in unused revolving commitments.

Capital allocation prioritizes shareholder returns and strategic growth. Nexstar returned $56 million in dividends in Q3 and has increased its quarterly dividend for 12 consecutive years, reflecting durable cash flows. The company repurchased $125 million of stock in the first nine months but paused buybacks in Q3 to conserve cash for TEGNA (TGNA). Management plans to return nearly two-thirds of free cash flow to shareholders in 2025, similar to 2024.

Outlook, Management Guidance, and Execution Risk

2025 Guidance and Assumptions

Management projects 2025 adjusted EBITDA between $1.5 billion and $1.595 billion, a decline from the election-driven 2024 peak but demonstrating resilience in a non-political year. This guidance assumes net distribution revenue will be relatively flat compared to 2024, with annual rate escalators offsetting continued subscriber attrition. Approximately 60% of the subscriber base is up for renewal later in 2025, with benefits expected to impact distribution revenue starting in Q1 2026.

Non-political advertising revenue is forecast to decline in the very low single-digit area year-over-year in Q4, benefiting from the absence of political crowd-out but offset by advertising softness and tougher programming comparisons at The CW and national digital business. Political advertising in Q4 is expected to be consistent with Q4 2021 levels, providing a baseline for the next election cycle.

The CW's Path to Breakeven

The CW's trajectory is critical to the investment thesis. Management projects 2025 losses will be 25% lower than 2024, with breakeven expected in 2026. This improvement is driven by three factors: (1) continued ratings growth from sports programming, (2) distribution revenue growth from affiliate renewals, and (3) operating expense savings from the Q4 2024 restructuring.

The network's performance provides evidence of execution. The NASCAR Xfinity Series transition to The CW has been "firmly established," delivering strong momentum and benefiting from broadcast scale. The first 2025 race at Daytona attracted 1.8 million average viewers, a 93% improvement from when it aired on FS1. The Atlanta race generated over 1.3 million viewers, the best performance since 2017. These metrics support management's confidence in the 2026 breakeven target.

TEGNA (TGNA) Integration and Synergies

The pending $6.2 billion TEGNA (TGNA) acquisition represents the largest bet in Nexstar's history. Management projects the deal will be more than 40% accretive to stand-alone adjusted free cash flow, with roughly $300 million in anticipated synergies. Approximately 45% of synergies will come from net retransmission revenue improvements, with the remainder from operational efficiencies including corporate overhead reduction, expanded hub operations, and running two stations off one infrastructure in overlap markets.

The transaction is projected to close in the second half of 2026, but faces significant regulatory hurdles. The DOJ issued a second request on October 30, 2025, and several state attorneys general have made inquiries. If the deal fails to receive regulatory approval by November 18, 2026, Nexstar would owe a $125 million termination fee. Conversely, if TEGNA (TGNA) accepts a superior proposal, it would pay Nexstar $120 million.

The integration complexity is substantial. TEGNA (TGNA) operates 64 stations in 51 markets, with a premium focus on top-25 DMAs. Combining operations will require navigating local ownership rules, consolidating back-office functions, and maintaining affiliate relationships. Management's track record with Tribune and Media General integrations provides confidence, but the scale of TEGNA (TGNA) is larger than any previous deal.

Political Advertising Cycle 2026

Management is already preparing for the 2026 midterm elections, projecting "prodigious" political revenue based on the company's geographic footprint and expected toss-up races, ballot propositions, and redistricting activity. This confidence stems from Nexstar's presence in contested markets and the historical pattern where political spending concentrates on local broadcast television.

The TEGNA (TGNA) acquisition would enhance this dynamic by adding stations in additional political battlegrounds. Management notes that broadcast will remain the dominant repository for political advertising, though connected TV (CTV) will be the fastest-growing segment. This dual exposure positions Nexstar to capture both traditional and digital political dollars.

Risks and Asymmetries: What Could Break the Thesis

TEGNA (TGNA) Regulatory Approval Risk

The single largest risk to the investment thesis is failure to obtain regulatory approval for the TEGNA (TGNA) acquisition. The DOJ's second request indicates serious antitrust scrutiny, and the FCC's review of broadcast ownership limits could result in required divestitures that reduce anticipated synergies. If the deal fails, Nexstar would incur $125 million in termination fees and significant legal and advisory costs without realizing any benefits.

The regulatory environment is fluid. The FCC currently enforces a 39% national ownership cap and local market restrictions, though deregulation efforts are underway. The Eighth Circuit vacated the Top-Four rule in July 2025, which prohibited owning two of the top four rated stations in a market. While this helps the TEGNA (TGNA) case, the DOJ's slow approval process for industry deals creates uncertainty.

Linear Television Structural Decline

The core risk to Nexstar's business model is accelerated cord-cutting and the shift of viewing to streaming platforms. While management notes "marginal improvements" in subscriber trends based on distributor earnings reports, the long-term trajectory remains negative. If subscriber attrition accelerates beyond management's ability to offset with rate increases, distribution revenue could decline materially.

The CW's sports strategy partially mitigates this risk by creating must-see live content, but the majority of Nexstar's revenue still depends on traditional pay-TV distribution. The company's digital assets provide some diversification, but local broadcast television remains the primary profit engine.

Debt Burden and Interest Rate Risk

Nexstar's $6.4 billion debt load, while well-structured, creates financial risk. The company has $3.7 billion in floating-rate term loans exposed to SOFR changes. A 100 basis point increase in SOFR would raise annual interest expense by $37 million. While the company has hedged some exposure and benefits from rate decreases, the debt burden limits financial flexibility.

The debt covenants require maintaining a maximum consolidated first lien net leverage ratio of 4.25:1 (or 4.75:1 after a material transaction). As of September 30, the ratio was 1.73x, providing substantial headroom. However, adding TEGNA's (TGNA) debt could pressure this metric, and any EBITDA decline from cyclical or structural factors could tighten the cushion.

Regulatory and Legal Contingencies

Nexstar faces several legal overhangs. The Department of Justice's local TV advertising antitrust litigation, initiated in March 2018, remains in discovery phase. While Nexstar denies allegations, an adverse ruling could result in significant fines and behavioral remedies.

Tribune-related tax contingencies pose additional risk. The IRS disputes the tax treatment of the 2009 Chicago Cubs transaction, proposing $182 million in tax and $73 million in penalties. While the Tax Court ruled in Nexstar's favor in October 2022, the IRS appealed to the Seventh Circuit, with a ruling expected in Q4 2025 or H1 2026. If the IRS prevails, Nexstar could owe approximately $225 million in federal and state taxes plus interest.

The FCC's Notice of Apparent Liability regarding WPIX could require divestiture or sale of the station within 12 months, potentially disrupting market strategy in New York.

Execution Risk on ATSC 3.0

The ATSC 3.0 opportunity is compelling but distant and uncertain. Meaningful revenue is not expected until 2028, requiring successful completion of the transition in top-55 markets. The technology requires consumer device adoption, automotive industry integration, and regulatory clarity. If the transition timeline slips or alternative technologies (like 5G or satellite) capture the connected car market, Nexstar's spectrum assets could be worth less than anticipated.

Valuation Context: Pricing a Transformation

At $189.01 per share, Nexstar trades at an enterprise value of $12.16 billion, representing 7.83x trailing EBITDA and 5.83x trailing free cash flow. These multiples appear modest for a market-leading franchise, suggesting the market prices in skepticism about linear TV's longevity.

Management provides valuation benchmarks. They note that a "top-tier multiple of 7 to 7.5 times would imply a stock price of $197 at the midpoint, a 35% premium to recent prices." More provocatively, they suggest applying the same valuation that Warner Bros. Discovery (WBD) and Paramount (PARA) used for their cable networks (10.5% WACC, negative 3% perpetuity growth) would imply a $210 share price, a 43% premium.

The peer group trades at similar multiples but with weaker fundamentals. Sinclair (SBGI) trades at 7.94x EV/EBITDA but has negative profit margins and a -11.52% ROE. Gray Television (GTN) trades at 6.92x with 2.81% profit margins. TEGNA (TGNA) trades at 7.80x with 11.97% profit margins but lacks Nexstar's scale and diversification. Scripps (SSP) trades at 6.84x with minimal profitability.

Nexstar's 21.35% ROE and 10.04% profit margin lead the peer group, while its 3.92% dividend yield and consistent dividend growth demonstrate capital return discipline. The 45.38% payout ratio is sustainable given $1.1 billion in annual free cash flow.

The valuation disconnect appears rooted in three factors: (1) cyclical election-year earnings create valuation uncertainty, (2) linear TV terminal value concerns, and (3) TEGNA (TGNA) deal execution risk. If management delivers on CW profitability in 2026, completes the TEGNA (TGNA) acquisition, and demonstrates early ATSC 3.0 revenue, the market may re-rate shares toward management's $197-$210 target range.

Conclusion: A Fortress Under Renovation

Nexstar Media Group is not a declining linear TV broadcaster; it is a local media fortress undergoing strategic renovation. The company's 200+ stations provide a defensive moat of retransmission fees and political advertising that generates over $1.1 billion in quarterly revenue and $1.1 billion in annual free cash flow. Management is simultaneously building offensive capabilities through The CW's sports transformation, NewsNation's cable news growth, and ATSC 3.0 spectrum monetization.

The investment thesis hinges on three variables. First, The CW must achieve breakeven in 2026 as management projects, transforming a loss-making asset into a profit center. Second, the TEGNA (TGNA) acquisition must receive regulatory approval and deliver the projected $300 million in synergies without excessive integration costs. Third, ATSC 3.0 must evolve from optionality to revenue generator by 2028 as the automotive and digital signage markets mature.

If these three pillars hold, Nexstar's combination of scale, strategic transformation, and capital allocation discipline should command a premium valuation. The market's current 7.8x EBITDA multiple reflects skepticism that management's renovation plan will succeed. For investors willing to underwrite execution risk, the potential re-rating toward a 7-7.5x multiple represents 35-43% upside, while the 3.9% dividend yield provides compensation during the wait. The fortress is solid; the renovation's success will determine whether it becomes a palace.