We retain our neutral recommendation on
), a diversified conglomerate, which has marked its presence
virtually in every sphere of media and entertainment through its
divisions, and remains focused on creating a favorable business
Born out of parent company Viacom in 2005, CBS Corporation's
operating divisions comprises CBS Television Network, CBS
Interactive, Showtime, CBS College Sports Networks, Local
Television and Radio Stations, CBS Outdoor and Simon &
CBS Corporation has been focusing on containing costs,
building operating efficiencies and taking strategic measures,
which together helped the company post better-than-expected
third-quarter 2012 results. The company posted quarterly earnings
of 65 cents a share that beat the Zacks Consensus Estimate of 60
cents, and surged 30% from the year-ago quarter.
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.
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 $1,931 million during the
quarter. Moreover, the company's international outdoor business
is currently facing significant challenges due to lingering
macroeconomic concerns, especially in Europe.
However, management remains optimistic and expects growth
momentum to continue based on reverse compensation from
affiliates, strong demand of its content and online video
streaming and retransmission consent.
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 at
least $1 billion in retransmission and reverse compensation
revenues by 2017.
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
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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