ITV (LSE :ITV) shares are buying and selling down nearly 5% at present (25 July) after it launched interim outcomes for the interval ending June 30. 

Regardless of a 2% decline in income down to £1.6bn, the broadcaster loved a 40% enhance in adjusted EBITA (Earnings Earlier than Curiosity, Tax and Amortisation). CEO Carolyn McCall believes the corporate may also finish the yr with elevated EBITA and is on observe to fulfill 2026 key efficiency targets.

“This was driven by strong viewing across our broadcast channels and ITVX,” she stated, citing the Euros 2024 and Love Island as favourites amongst viewers.

Nonetheless, the group’s manufacturing arm, ITV Studios suffered a 13% lower in income. This will have contributed to the drop at present. The loss has been attributed to lingering results from the 2023 writers’ and actors’ strikes, which delayed manufacturing schedules.

Income earlier than tax elevated by 51% to £178m and the division is anticipated to ship document income over the complete yr. However the strikes are anticipated to ship additional losses amounting to round £80m. Income is anticipated to “be down low single digits” for the complete yr.

Trying forward

Total, ITV seems upbeat and optimistic concerning the outcomes. However there was little response from brokers. No score adjustments have been put in place but and no new brief positions opened.

I don’t count on this morning’s dip to have a major impact on the long-term price progress. The shares are up almost 28% this yr, having grown steadily because the FY23 outcomes introduced in early March. At the moment, each ITV studios and ITVX delivered robust outcomes, with the consequences of the author’s strike not but evident.

Utilizing a reduced money stream mannequin, analysts deem the shares to be undervalued by 65%. The price-to-earnings (P/E) ratio of 15.9 is according to the trade common. And income and earnings are anticipated to develop — though not considerably.

The corporate continues to pay a constant dividend, with a yield of 6%. Earnings per share (EPS), at 5.3p, are simply sufficient to cowl the 5p annual dividend. This makes it a reasonably respectable and dependable choice for revenue buyers.

What does the longer term maintain?

In 2022, ITV was demoted from the FTSE 100 to the FTSE 250. The share price fell sharply (by 40%) within the following days. Traders fled and FTSE 100 tracker funds needed to dump their inventory, with the price ultimately reaching a low of 53p later that yr.

Since then, its fortunes have been blended. It discovered its toes once more and new buyers started to heat to its prospects. The 2023 market stoop price it dearly but it surely’s recovered considerably since. 

Fierce competitors and a quickly altering media panorama proceed to threaten its future. Its manufacturing arm is protecting it afloat and ITVX maintains a share of the web streaming market.

However to outlive in the long term, I feel it might have to enact extra concrete adjustments. 

I consider an entire rebranding and elimination of ‘TV’ from the identify can be helpful. With an increasing number of viewers consuming media by way of good units, this connection to the previous could also be misplaced on youthful generations.

My shares have completed properly thus far however I see challenges forward for the broadcaster.