Earnings Preview: CBS

CBS (CBS) is expected to report Q3 earnings before market open Thursday, Oct. 30, with a conference call scheduled for 8:30 am.

Guidance

Analysts are looking for EPS of 40c on revenue of $3.37B. The consensus range for EPS is 36c to 43c, while the consensus range for revenue is $3.31B to $3.42B, according to First Call.

Analyst Views

CBS has announced that it believes that its Q3 EPS was 42c to 44c, compared with analysts' consensus of 41c at the time of the announcement. The TV network reported that the economic slowdown had lowered its advertising revenue, and it expects the advertising environment to deteriorate further in the short term. As a result, CBS now expects its 2008 adjusted operating income to decline by about 15% year-over-year.

A number of research firms have recently issued negative notes about CBS. Caris responded to the company's preannouncement by downgrading the stock to Below Average from Average, and slashing its target to $7 from $17. Calling the stock a "value trap," Pali Capital initiated the shares with a Sell rating and $5 target. The firm believes that expectations for the company's performance in 2009 are still unrealistically high in light of the deteriorating economy. Stanford lowered its target to $11 from $22 on October 14. However, the firm maintained a Buy rating on CBS, citing the company's below-average valuation, compared with its peers.

CBS CEO Les Moonves recently said that Cnet, which CBS acquired earlier this year, will contribute about $100M in operating profit to the company in 2008.