CBS May Be Eyeing An Earnings Miss

| About: CBS Corporation (CBS)

Summary

CBS Corp. and its billboard division, CBS Outdoor Americas Inc., completed their separation in early July.

Analysts have already accounted for the effects of the divestiture, but they may not have lowered their estimates enough.

CBS’ famous eye logo may be looking at quarterly earnings that miss the consensus.

Competition from online content, the World Cup and the end of a popular show may lead to weakness in CBS earnings.

By Sridharan Raman

CBS (NYSE:CBS) is battling several headwinds in the current quarter. The World Cup tournament, broadcast in the U.S. by ABC and ESPN, drew viewers and may have led to weak advertising results at CBS, while online content continues to draw ad dollars away from television. Finally, CBS' hit television series, "How I Met Your Mother," came to an end. There will be plenty of revenue from syndication, but the show has been a major draw for TV viewers. The large negative StarMine Predicted Surprise of 5.3% indicates that CBS is likely to report an earnings miss for the fiscal second quarter.

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Source:Thomson Reuters Eikon/StarMine

Watching consensus fall

Analysts have been lowering their estimates over the past 90 days. The StarMine SmartEstimate is 4 cents below the already-lowered consensus, and is at 71 cents per share, an indication that the consensus may go lower before the company reports, or the company may miss earnings estimates. Since the beginning of June, there have been 17 analysts that have lowered estimates and only one that has gone higher.

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Source:Thomson Reuters Eikon/StarMine

A cloudy screen

CBS has an Analyst Revisions Model (ARM) score of 10. That's in the bottom decile of all companies in the region and an indication of continued analyst pessimism. Analysts also have revised their revenue forecasts downward for the whole year and for next year (by almost 4%).

CBS may find it hard to replicate the success of "How I Met your Mother," which may mean a drop in prime time ratings. Despite the strong economy, ad revenues don't seem to be soaring as the biggest spenders (pharma and autos) are increasing online marketing.

Another worry for CBS is the lack of major sporting events on its lineup, although it is partnering again with the NFL, usually a big draw. CBS also owns the cable giant Showtime, which has been a success, but all cable providers are dealing with increased content costs.

After five consecutive quarters of earnings beats, the shorts now are betting heavily against CBS. There is almost 21% of short interest in the stock. It looks like we may not be the only ones looking into the golden eye and seeing an earnings miss this quarter.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Alpha Now at Thomson Reuters is a team of expert analysts that are constantly looking at the financial landscape in order to keep you up to date on the latest movements. This article was written by Sridharan Raman, independent commentator and analyst. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article.