CBS Estimates Lowered on Exposure to Deteriorating Ad Trends

As a follow-up to my note the other day, "Broadcast TV Networks Weathering the Storm", Barclays Capital (Formerly Lehman Bros.) analyst Anthony DiClemente doesn't share my take on CBS (NYSE: CBS). In his latest note out Monday morning, he lowers 2009 estimates and casts doubt on the stock into 2010.

A quick summary from his January 5, 2009 report follows:

"We are lowering 4Q08 and 2009 estimates to align our CBS model with our Barclays Capital team estimates for 2009 and 2010 U.S. advertising trends (-10% and +1%, respectively). Given CBS's outsized exposure to deteriorating TV advertising trends, we believe downward 2009 and 2010 EPS revisions remain necessary. As such, we reiterate our 3-Underweight rating.

• CBS 4Q08E EPS goes to $0.23 from $0.27 as 4Q08E EBITDA goes to $528M from $576M. 2009E EPS goes to $0.90 from $1.05 as 2009E EBITDA goes to $2.05B from $2.22B. 4Q08 and FY09 consensus EPS is currently $0.28 and $1.13, respectively.

• Our largest model changes come at the Television segment, where our 09E EBITDA estimate came down by $115M. Further downside to margins is possible if cost cuts and layoffs do not continue to mitigate revenue losses. 2009E revenue estimate is $13.1B; every $100M of EBITDA lost equates to roughly $0.10 of EPS.

• Importantly for the stock, another down year in 2010 could put CBS's dividend at further risk. Clearly, 2010 estimates are the key for CBS shares, and visibility here remains limited."