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I reckon the low ITV share price and 6%+ yield are too tempting to ignore

Broadcaster ITV (LSE: ITV) looks like one of the most tempting turnaround stocks on the FTSE 100 after recent sharp declines. It’s having a tough time but right now, the price certainly looks right.

ITV Q1

The stock is down 4.5% after ITV posted a 4% drop in total external revenues to £743m for the first quarter, mostly due to a worse than expected 7% drop in advertising. It pinned the decline on our old friends “continuing economic and political uncertainty”, as well as the timing of Easter. Unfavourable currency movements haven’t helped either.

The £5bn group previously warned the first half of this year will be “impacted” by planned essential investments, the timing of ITV Studios deliveries and pre-launch costs on its BritBox joint venture with BBC Studios. The subscription video on-demand service is expected to launch in the second half of this year and a lot now rests on how well it fares.

Small screen

The ITV Studios production arm did post a 1% increase in revenues to £385m while VOD revenues grew by 22%. Management also hailed “continued good viewing performance onscreen and online”, with ITV family share of viewing up 4% and online viewing up 16%.

The group continues to expect double-digit growth in online revenue and good organic revenue growth from ITV Studios. CEO Carolyn McCall hailed a strong slate of programmes, including Line of Duty, this year’s most watched UK programme, with Wild Bill, Beecham House, A Confession, the Rugby World Cup and Love Island still to come. 

Overall it’s a mixed bag in contrast to another company that reported today and has jumped 15% after issuing a strong trading update.

Poor viewing

The ITV share price has more than halved since peaking at 275p towards the end of 2015, and today’s 125p is starting to look very cheap. It currently trades at just 9.7 times forecast earnings, which will tempt many. However, earnings look bumpy, with City analysts forecasting a 12% drop in 2019, albeit followed by a 5% climb next year.

The other big temptation is the yield, a forecast 6.2% and covered 1.7 times. The dividend looks secure as due to the strong balance sheet, with current net debt of just £981m and a relatively small net pension deficit of £133m. Kevin Godbold has decided it is well worth snapping up for his Stocks and Shares ISA.

So can we anticipate growth as well as income? This year could be tough, with ongoing Brexit uncertainty and no World Cup, which will hit the summer comparables. BritBox will suck in money before it (hopefully) starts spitting it out.

The big picture

ITV is battling to build alternative revenues to offset the advertising slump, and McCall has a tough job on her hands. At least people are still switching on to ITV, no mean feat given the rival entertainment sources these days.

Line of Duty has shown that ITV can keep the binge watchers happy, and hopefully ITV Studios can continue to deliver. ITV Hub is doing well. The group has a fight on its hands, but at today’s low price, it might just be worth tuning in.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.