) second quarter 2014 adjusted earnings of 78 cents per share grew
4% year over year and was ahead of the Zacks Consensus Estimate of
72 cents. Aggressive share buyback activity cushioned the bottom
CBS Corporation - Earnings Surprise |
Including, one time items, the company reported earnings of 76
cents per share, unchanged from the prior-year quarter.
However, absence of the NCAA Division I Men's Basketball
Championship matches this quarter had a telling effect on the CBS
Corp's revenues which fell 5.4% to $3,188 million. Revenues also
came short of the Zacks Consensus Estimate of $3,305 million.
NCAA Division matches were broadcasted by Turner Broadcasting
Systems, Inc. a subsidiary of Time Warner Inc. (
). In 2010 CBS and Turner signed $10.8 billion dollar agreement to
receive joint broadcast rights of NCAA tournament which was part of
an effort to reduce costs and generate profits.
Revenues were also marred by lower advertising and content
licensing revenues, which declined 7% and 9.4% to $1,636 million
and $903 million, respectively, more than offsetting the 6.7% rise
in affiliate and subscription fees.
Also, operating income before depreciation and amortization (OIBDA)
decreased 5.5% to $801 million and operating income fell 5.8% to
revenues fell 8.6% to $1,835 million owing to lower television
licensing and advertising revenues. The segment's OIBDA fell 12.4%
to $376 million due to lower revenue and increased investment in
new television content.
revenues dipped 0.4% to $516 million as lower licensing revenues
offset growth in affiliate fees. However, segment OIBDA increased
5.8% to $219 million due to lower programming costs and higher
revenues increased 11.6% to $211 million and the segment's OIBDA
increased 14.3% to $24 million. Sale of both print and digital
books increased in the quarter, the best sellers being
by Hillary Rodham Clinton and
City of Heavenly Fire
by Cassandra Clare.
Unfavoarble advertising trends marred
revenues. The segment's revenue decreased 4.7% to $665 million. CBS
Television Stations' and CBS Radio's revenues fell 6% and 3%,
respectively. The segment's OIBDA decreased 6.7% to $238 million
due to lower revenues partly run down by lower programming costs.
Other Financial Details
CBS Corp. ended the quarter with cash and cash equivalents of $261
million, long-term debt of $5,846 million, and shareholder equity
of $9,274 million. For the first half, the company generated net
cash flow from operations of $624 million and incurred capital
expenditures of $69 million. Free cash flow of $524 million was
generated during the first half.
In the quarter, CBS Corp. repurchased 7 million shares for $411
million bringing year-to date count to 38.5 million shares at a
total cost of $2.4 billion. Also the company increased its
share repurchase authorization by $3 billion to $6 billion.
In addition, the company announced a 25% hike in its quarterly
dividend to 15 cents per share. The dividend is payable on Oct 1,
2014 to shareholders of record on Sep 10, 2014.
Declining advertising trends in the quarter suppressed CBS Corp's
performance. The company expects advertising to pick up in the
second half given the Thursday Night NFL games and mid-term
CBS Corp., which competes with The Walt Disney Company (
), is focused on lowering its dependency on conventional
advertising, which is commendable since it is highly susceptible to
economic headwinds. Separation of CBS Outdoor Americas Inc. (
) was a step in that direction following which contribution from
advertising to the total revenues came down to nearly 50%.
Since the 50:50 split in advertising and non advertising revenues,
the company is focusing on enhancing its non-advertising revenue
streams like reverse compensation from affiliates, content
monetization, digital distribution, syndication sales and
retransmission fees to boost its revenues.
CBS Corp. continues to expect retransmission fees to hit the $2
billion mark in 2020. Currently, it expects retransmission fees to
reach $1 billion by 2017.
Additionally, this Zacks Rank # 3 (Hold) stock expects CBS
Television Network to be a major growth driver as the network owns
most shows in the top 10 and top 20 countdowns. Notably, its shows
The Big Bang Theory
are worth mentioning in this respect.
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