) second-quarter 2012 earnings of 65 cents a share beat the Zacks
Consensus Estimate of 58 cents and jumped 12% from the year-ago
quarter on the back of increase in affiliate and subscription fee
revenues as well as effective cost management that helped in
mitigating the fall in advertising revenue.
Management hinted that total revenue of $3,476 million dropped
3% over the prior-year quarter due to difficult year-over-year
comparisons. The prior-year quarter, benefited from a multi-year
digital streaming contract and the NCAA men's basketball
championships, which was aired in the first quarter of the current
year. Total revenue also fell short of the Zacks Consensus Estimate
of $3,543 million.
Advertising revenue declined 3% to $2,142 million, whereas
content licensing and distribution revenue slipped 8% to $816
million. On the other hand, affiliate and subscription fees rose 8%
to $465 million.
Adjusted operating income before depreciation and amortization
(OIBDA) increased 3% to $901 million, whereas OIBDA margin expanded
approximately 200 basis points to 26%.
revenue, comprising Entertainment, Cable Networks and Publishing,
decreased 4% to $2,342 million.
revenue fell 7% to $1,707 million from the year-ago quarter that
gained from the initial licensing of the programming for digital
streaming, domestic syndication sale of Frasier, and the NCAA men's
basketball championships, which fell in the first quarter of the
current year versus the second quarter of the previous year.
However, these were to some extent mitigated by increase in
high-margin retransmission revenue and rise in international
syndication revenue in the quarter under review. OIBDA in the
segment dipped 3% to $426 million.
Growth in subscriptions rates at Showtime Networks, CBS Sports
Network and Smithsonian Networks along with a rise in licensing
revenue due to digital streaming of Showtime original series
revenue to jump 8% to $446 million. Cable Networks OIBDA increased
8% to $190 million.
revenue rose 3% to $189 million, reflecting increased sales of
digital books, partly offset by fall in sales of print books.
Publishing OIBDA plunged 53% to $9 million during the quarter due
to legal charges.
revenue, including Local Broadcasting and Outdoor, came in at
$1,185 million, up from $1,181 million in the prior-year
revenue climbed 2% to $704 million from the year-ago quarter.
Television Stations revenue jumped 6% on the back of higher
automotive and political advertising, as well as increase in
retransmission revenue, partly offset by fall in retail and
financial services advertising.
CBS Radio revenue fell 2%, reflecting improved automotive
advertising, offset by fall in advertising related to retail and
financial services. The segments' adjusted OIBDA jumped 8% to $248
Management now expects Local Broadcasting revenue to rise in the
high-single digits for the third quarter, buoyed by the growth of
TV stations in the teens. This augmentation comes on the back of
the auto, political and the entertainment categories.
revenue edged down 2% to $481 million. Revenue for the Americas
rose 2% in constant currency portraying growth in the U.S.
billboards and display businesses. Revenue for Europe inched up 1%
in constant currency, mirroring increase in advertising revenue
related to the 2012 Summer Olympics in London. Outdoor OIBDA grew
8% to $93 million.
CBS Corporation now projects Outdoor revenue to be rising in the
high-single digits for the third quarter in constant currency,
aided by advertising sales associated with the London Olympics and
growth in the U.S.
CBS remains well positioned to drive revenue growth in the
coming quarters through its strategic initiatives and operating
efficiencies. Management remains optimistic and expects growth
momentum to continue in fiscal 2012, based on reverse compensation
from affiliates, strong demand of its content and streaming,
retransmission consent and political advertising.
Revenues from retransmission continue to grow at a brisk pace.
Further, the company is increasingly getting reverse compensation
from its affiliates, marking a new source of revenue.
The presidential elections will be accretive to the company's
result in the upcoming quarter. In 2013, AFC Championship Game, the
Super Bowl and the Grammys will benefit CBS. Management expects
reverse compensation to surpass $100 million in 2013.
Other Financial Details
CBS Corporation ended the quarter with cash and cash equivalents
of $1,888 million, total long-term debt of $6,801 million, and
shareholders' equity of $10,118 million. The company generated cash
flow from operations of $612 million and incurred capital
expenditures of $54 million, resulting in free cash flow of $558
During the quarter, the company bought back 9.4 million shares
at a price of $32 per share, aggregating $301 million. Since the
commencement of the program, through June 30, 2012, CBS Corporation
has bought back 60.6 million shares at a price of about $26 per
share, totaling $1.59 billion.
The company recently announced that its Board of Directors has
agreed to enhance its share repurchase program and hike the
quarterly cash dividend. The share repurchase authorization will
rise by 57% to $4.7 billion from the initial program announced in
Under the new program, the company has already repurchased
shares of worth $1.7 billion, with $3 billion remaining for future
repurchases. The company aims to complete the new share repurchase
program by the end of 2014.
Additionally, the Board of Directors also approved a 20% hike in
its quarterly cash dividend to 12 cents from 10 cents a share. The
increased dividend will be paid on October 1, 2012 to shareholders
of record as of September 10, 2012.
In a strategic move to reduce interest outflow, CBS Corporation
refinanced its debt during the quarter. The company announced the
offering and redemption of debt, simultaneously. The company issued
1.95% senior notes of $400 million due 2017 and 4.85% senior notes
of $500 million due 2042.
The proceeds were utilized to redeem 8.625% debentures of $152
million due August 1, 2012. The company also repaid 5.625% senior
notes of $338 million due August 2012 and 8.20% senior notes of
$400 million due 2014.
Currently, we have a long-term Outperform recommendation on the
stock. However, CBS Corporation, which competes with
Walt Disney Company
), holds a Zacks #2 Rank that translates into a short-term Buy
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