Global media and entertainment company iHeartMedia (NASDAQ:IHRT) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 5.8% year on year to $1.01 billion. Its GAAP profit of $0.27 per share was 3,283% above analysts’ consensus estimates.

Is now the time to buy iHeartMedia? Find out in our full research report.

Company Overview

Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ:IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.

Broadcasting

Broadcasting companies have been facing secular headwinds in the form of consumers abandoning traditional television and radio in favor of streaming services. As a result, many broadcasting companies have evolved by forming distribution agreements with major streaming platforms so they can get in on part of the action, but will these subscription revenues be as high quality and high margin as their legacy revenues? Only time will tell which of these broadcasters will survive the sea changes of technological advancement and fragmenting consumer attention.

Sales Growth

Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years. iHeartMedia’s demand was weak over the last five years as its sales were flat, a poor baseline for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Just like its five-year trend, iHeartMedia’s revenue over the last two years was flat, suggesting it is in a slump.

iHeartMedia also breaks out the revenue for its three most important segments: Multiplatform, Digital Audio, and Services, which are 61.5%, 29.9%, and 8.9% of revenue. Over the last two years, iHeartMedia’s Multiplatform revenue (broadcasting, networks, events) averaged 4.4% year-on-year declines, but its Digital Audio (podcasting) and Services (media representation) revenues averaged 7.2% and 6.7% growth.

This quarter, iHeartMedia grew its revenue by 5.8% year on year, and its $1.01 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 3.6% over the next 12 months, an improvement versus the last two years. While this projection shows the market thinks its newer products and services will fuel better performance, it is still below average for the sector.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

iHeartMedia has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.6%, lousy for a consumer discretionary business.

iHeartMedia’s free cash flow clocked in at $73.35 million in Q3, equivalent to a 7.3% margin. This cash profitability was in line with the comparable period last year and above its two-year average.

Key Takeaways from iHeartMedia’s Q3 Results

We were impressed by how significantly iHeartMedia blew past analysts’ EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its EBITDA forecast for next quarter was underwhelming and its EBITDA guidance for the full year fell short of Wall Street’s estimates. Overall, this was a mixed quarter. The stock traded up 2.3% to $1.78 immediately following the results.

Is iHeartMedia an attractive investment opportunity right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.