E.W. SCRIPPS Co (SSP) stock intrinsic value fair value estimate & owner earnings analysis

The E.W. Scripps Company runs two businesses: about 60 local television stations across the United States (Local Media), and a group of free over-the-air national networks led by ION (Scripps Networks). Local stations earn money from advertising and from retransmission fees paid by cable, satellite and streaming distributors. Political advertising floods in during even-numbered election years and nearly disappears in odd years, so we look at two-year cycles rather than single years. Earning power. After interest, the owners' cash has averaged roughly $175 million a cycle-year since the 2021 ION acquisition, but it has been falling. Measured before lenders are paid, the business produced about $296 million in 2021, $435 million in 2022, $244 million in 2023, $428 million in 2024 and $194 million in 2025. Averaging each election cycle gives about $366 million for 2021-22, $339 million for 2023-24 and $311 million for 2024-25. We anchor on about $310 million a year, the median of the post-ION two-year cycles weighted to the most recent cycle. The 2025 figure includes $44.5 million of one-time refinancing fees, which we treated as non-recurring. Large intangible amortization (about $92 million a year) is added back because it is a cost of past acquisitions; the decay of those assets is instead charged through the declining paths below. Stock compensation of about $18 million a year is charged as a real cost. What has changed. In 2026 the national networks took a $1.1 billion write-down after national advertising and ratings weakened; Scripps Networks' second-quarter revenue fell 16.5% and its profit fell by more than half. Carriage revenue at the local stations fell 17% in the second quarter, partly because of blackouts during contract disputes with Comcast and DirecTV ($26.7 million impact). Owner cash flow growth in 2025 was sharply negative against the 2024 election year. Even comparing like-for-like odd years, 2025 was below 2023. We see no dated, filed reason for that decline to reverse, so every case starts with continued decline. What it owes. Borrowings are about $2.52 billion at June 30, 2026, against $13 million of cash. The main pieces are $523 million of 3.875% notes due January 2029, $750 million of 9.875% second-lien notes due August 2030, $392 million of 5.375% unsecured notes due January 2031, term loans due 2028 and 2029 at 7.2% to 9.6%, and a $361 million receivables facility. The low-coupon notes save some interest, but the 9.875% notes and 9.6% term loan cost far more than 6%. We net these to a cost-of-debt adjustment of about $200 million. Ahead of the common stock sits Berkshire Hathaway's $600 million preferred stock. Its dividends have gone unpaid since 2023 and compound at 9%; its redemption value was about $782 million at mid-2026. Until it is retired, the common cannot receive dividends or buybacks. Small committed station purchases (WTVQ, and options on stations from INYO for about $47 million) add roughly $65 million. Total claims ahead of the common come to about $3.47 billion. Base case. Cash flow before interest declines about 4% a year from $310 million, reflecting the six-year record of pay-TV subscriber losses outrunning rate increases, weakening national network advertising, and decay in the ION network asset that was just written down. Political advertising continues on its cycle but does not grow. Management's program to save $125-150 million by 2028 is not credited, because it is a target, not a result. The business is worth about $3.0 billion against $3.47 billion of claims, leaving about -$5.24 a share. The company appears to owe roughly $500 million more than the business is worth. Bear case. Decline runs at about 6% a year and includes one advertising recession of the kind broadcasting suffered in 2008-2009, when local TV ad revenue fell roughly 20-30%. We cut cash flow by 35% and 25% in two consecutive years. In that case the first-lien leverage covenant (3.25x from the end of 2026) would come under pressure and the 2028-2029 maturities would have to be refinanced at high rates. The business would be worth about $2.2 billion against $3.47 billion of claims, or about -$13.09 a share: roughly $1.2 billion short. Bull case. The cost program lands and lifts pre-interest cash flow to about $340 million by 2028. Carriage disputes are settled on renewal terms already visible, and decline slows to about 1.5% a year. The business would be worth about $4.4 billion, leaving about $10.12 a share for the common after lenders and the preferred are paid. We previously expected both lower cases to leave nothing for the common and the bull case to leave about $3 a share. The business has deteriorated since then: the network write-down and the carriage blackouts are new. The higher bull figure reflects an updated measurement of the cash the stations produce before interest, not an improvement in the business. Earlier figures are not directly comparable. The main uncertainty is control. Sinclair owns nearly 10% of the shares and proposed a merger in late 2025 and January 2026, which the board rejected. A sale would trigger the preferred's change-of-control redemption at 105% plus unpaid dividends, so the common receives only what is left after about $3.47 billion of claims. The Scripps family controls the voting shares. How sure we are and the margin-of-safety price. We are fairly sure of the earnings level, because the political cycle is well documented. We are much less sure of the rate of decline. The worst plausible outcome is an advertising recession arriving just before the 2028-2030 maturities, which could force dilution or a restructuring that wipes out the common. The structure (heavy debt plus a compounding senior preferred) magnifies every error: each $10 million a year of cash flow moves the common by roughly $1.70 a share. If we are wrong about the speed of decline and the cost savings, the common could be worth $10 or more. If we are wrong in the other direction, it is worth nothing. The common pays nothing in the meantime and is legally barred from doing so. On today's facts our median outcome is below zero, so no meaningful margin-of-safety price applies. The margin-of-safety price is a nominal $0.50, which only makes sense as an option on the bull case or on a sale. It would be reconsidered only if the preferred is dealt with or a sale is agreed at a price that clears the claims.