CBS Corporation: Earnings Preview

Apr.30.12 | About: CBS Corporation (CBS)

CBS Corporation (NYSE:CBS) is slated to report its first-quarter 2012 financial results on Tuesday, May 1. The current Zacks Consensus Estimate for the quarter stands at 43 cents per share, indicating an estimated increase of 48.3% from the prior-year quarter. Revenue, as per the Zacks Consensus Estimate, is $3,775 million.

Fourth-Quarter 2011: A Synopsis

CBS Corporation's quarterly earnings of 57 cents a share surpassed the Zacks Consensus Estimate of 53 cents, surging 23.9% from 46 cents earned in the year-ago quarter.

However, revenue inched down 3.1% year over year to $3.78 billion, which was a healthy number as the quarter lacked significant political advertising revenues compared with the prior-year quarter. Moreover, the prior-year quarter's revenue included the second-cycle syndication sale of CSI: Crime Scene Investigation.

Estimate Revisions Trend


A positive sentiment is evident among the analysts for the upcoming quarter. Among the 21 analysts providing estimates for the quarter, four revised their estimates upward while none moved in the opposite direction in the last 30 days. For fiscal 2012, five analysts revised the estimates in the upward direction while none lowered the same.


The Zacks Consensus Estimate for the first quarter remained stable over the last 30 days. Most of the analysts remained constructive on the stock based on the company's growth prospects. The Zacks Consensus Estimate inched up a penny to $2.36 for fiscal 2012 as the analysts expect healthy political TV advertising revenues, which in turn, is anticipated to boost profitability.

According to the company's Chief Executive Officer Les Moonves, profits are forecast to rise by $180 million, primarily due to political ads. These should surpass the profits of the last presidential election year.

Positive Surprise History

With respect to earnings surprises, CBS Corporation has topped the Zacks Consensus Estimate over the last four quarters in the range of 7.6% to 52.6%. The average remained at 24.4%, indicating that the company has outperformed the Zacks Consensus Estimate by that same measure in the trailing four quarters.

Our Take

CBS remains well-positioned to drive revenue in the coming quarters through its strategic initiatives and operating efficiencies. Management remains optimistic and expects the growth momentum to continue in fiscal 2012 based on strong political advertising, reverse compensation from affiliates, strong demand of its content and streaming and retransmission consent.

Moreover, CBS is likely to benefit from an increase in political ad spending as it owns more TV stations than its competitors News Corporation's (NASDAQ:NWS), Fox and Comcast Corporation's (NASDAQ:CMCSA) NBC.

Recently, through one of its divisions, CBS Interactive, the company has entered into a partnership with TwitchTV, a leading video game broadcasting network and Major League Gaming (MLG), the world's most renowned eSports league. The company's expansion into the fastest growing live gaming and eSports market is likely to enhance its profitability.

We believe that CBS Corporation's long-term agreements with the NFL, the NCAA, the SEC and the Grammys will generate a stream of positive cash flows for the company in the long run.

Currently, we have a long-term 'Outperform' rating on the stock. Moreover, CBS Corp. holds a Zacks #1 Rank, which translates into a short-term 'Strong Buy' rating.