We recently downgraded our recommendation on
), a diversified media conglomerate, to Neutral with a price target
of $40.00. Earlier, we had an Outperform view on the stock.
Having emerged out of parent company, Viacom in 2005, CBS
Corporation's operating divisions comprises CBS Television Network,
CBS Interactive, Showtime, Local Television and Radio Stations, CBS
Outdoor and Simon & Schuster (publishing).
Dip in Top Line
CBS Corporation witnessed a fall in the top line during the
second quarter of 2012. 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.
Due to its exposure in publishing, radio and television
broadcasting, and outdoor billboard businesses, CBS remains highly
susceptible to the advertising market. The deterioration in the
economy of the major markets such as Los Angeles, New York or
Chicago, where the company operates may result in a fall in
advertising demand, and in turn, in the company s revenue
Advertising revenue declined 3% to $2,142 million, whereas
content licensing and distribution revenue slipped 8% to $816
million. However, affiliate and subscription fees rose 8% to $465
Earnings Move Upwards
CBS Corporation's focus on containing costs, building operating
efficiencies and taking strategic measures, have together helped
the company post better-than-expected second-quarter 2012 bottom
line results. The company posted earnings of 65 cents a share that
beat the Zacks Consensus Estimate of 58 cents and jumped 12% from
the year-ago quarter.
Strategic Initiatives to Drive Growth
CBS Corporation has marked its presence virtually in every
sphere of media and entertainment through its divisions, and
remains focused on creating a business environment that nurtures
diversity. Management remains optimistic and expects growth
momentum to continue in fiscal 2012 based on reverse compensation
from affiliates, strong demand of its content and online video
streaming, retransmission consent, and political advertising.
Management expects reverse compensation to surpass $100 million in
The company is striving to add diverse revenue streams to hedge
against economic cycles. The retransmission, affiliate and online
distribution fees have been non-advertising-driven revenue and will
become a significant growth driver. CBS is eyeing more than $250
million in retransmission fees in fiscal 2012.
The above analysis supports our unbiased view on the stock. CBS
Corporation, which competes with
Walt Disney Company
), holds a Zacks #2 Rank that translates into a short-term 'Buy'
rating, and well defines the company's endeavors undertaken to keep
afloat in an economy that is still grappling to regain its lost
CBS CORP (CBS): Free Stock Analysis Report
DISNEY WALT (DIS): Free Stock Analysis Report
NEWS CORP INC-A (NWSA): Free Stock Analysis
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