CBS Corporation
(
CBS
) posted third-quarter 2012 adjusted earnings of 65 cents a
share, surpassing the Zacks Consensus Estimate of 60 cents and
jumped 30% from the year-ago quarter as healthy top line
performance and rise in operating income boosted the quarterly
earnings. Including one time items, earnings came in at 60 cents,
up 20% year over year.
Total revenue came in at $3,418 million, up 1.6% from the
prior-year quarter, reflecting increased revenues from affiliate
and subscription fee along with strong performance from content
licensing and distribution. However, the reported revenue fell
short of the Zacks Consensus Estimate of $3,503 million.
Revenues from content licensing and distribution surged 8%
year over year to $931 million, while affiliate and subscription
fees marked an increase of 12% to $496 million. However,
advertising revenue declined 3% to $1,931 million during the
quarter.
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, based on reverse compensation from
affiliates, strong demand of its content and streaming and
retransmission consent.
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.
Operating income before depreciation and amortization (OIBDA)
increased 7% to $898 million, whereas OIBDA margin expanded
approximately 100 basis points to 26%.
Segment Details
Content Group
revenue, comprising Entertainment, Cable Networks and Publishing,
augmented 2.4% to $2,326 million.
Entertainment
revenue rose 3% to $1,680 million from the year-ago quarter,
reflecting increased retransmission revenues along with a rise in
domestic and international television license fees. However,
segment's OIBDA dipped 5% to $384 million due to adverse revenue
mix and increased costs.
Growth in subscriptions rates at Showtime Networks, CBS Sports
Network and Smithsonian Networks supplemented
Cable Networks
revenue to mark an elevation of 4% to $436 million. Moreover,
increased affiliate revenues helped segment's OIBDA to increase
by 12% to $227 million.
Publishing
revenue declined 5% to $210 million, as lower sales of print
books more than offset the increased sales of digital books.
However, high margin digital books sales led to a 2.6% increase
in the segment's OIBDA to $39 million.
Local Group
revenue, including Local Broadcasting and Outdoor, came in at
$1,147 million, up 1.2% from the prior-year quarter.
Local Broadcasting
revenue inched up 1% to $661 million from the year-ago quarter.
Television Stations revenue jumped 7% on the back of higher
political advertising, as well as increase in retransmission
revenue. However, CBS Radio revenue fell 5% during the quarter.
The segments' adjusted OIBDA increased 16% to $213 million on
account of lower costs associated with programming and production
as well as music royalty.
Outdoor
revenue strengthened 2% to $486 million. Revenue for the Americas
inched up 1% in constant currency portraying growth in the U.S.
billboards and display businesses. Revenue for Europe grew 16% in
constant currency, mirroring increases in advertising revenue
related to the 2012 Summer Olympics in London. Outdoor OIBDA
surged 24% to $99 million.
Other Financial Details
CBS Corporation ended the quarter with cash and cash
equivalents of $947 million, long-term debt of $5,907 million,
and shareholders' equity of $10,289 million. The company
generated cash flow from operations of $222 million and incurred
capital expenditures of $59 million, resulting in free cash flow
of $163 million.
During the quarter, the company bought back 8.6 million shares
at an aggregate price of $300 million. Since the commencement of
the program, through September 30, 2012, CBS Corporation has
bought back 69.2 million shares at an average price of about $27
per share, totaling $1.89 billion.
In a strategic move to reduce interest outflow, CBS
Corporation refinanced its debt during the second quarter. The
company announced the offering and redemption of debt,
simultaneously. The company anticipates these measures to lead to
annual interest savings of $53 million.
Currently, we have a long-term 'Neutral' recommendation on the
stock. However, CBS Corporation, which competes with
News Corporation
(
NWSA
) and
Walt Disney Company
(
DIS
), holds a Zacks #3 Rank that translates into a short-term 'Hold'
rating.
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