CBS Earnings: Surprisingly Good

CBS (CBS) stock has been beaten down over the past year--down some 30 percent. But Tuesday the stock was up on the company's better than expected quarterly results. And good news for shareholders, CBS raised its quarterly dividend from 25 cents per share to 27 cents per share,a move Wall Street was hoping CEO Les Moonves would make to help turn around the sinking stock.

CBS is more exposed to an industry-wide advertising slowdown, with about two third of its revenue coming from advertising. It's also more exposed to the impact of the writers' strike than any of its competitors, with its signature network comprising a big chunk of the company. So, the fact that the company eked out a bit of earnings growth was a pleasant surprise for Wall Street.

Tuesday morning, CBS reported first quarter net earnings of 36 cents a share, up from 28 cents per share a year earlier, on $3.7 billion in revenue, basically flat, even though last year's quarter included the Super Bowl and NCAA basketball, and this year's quarter didn't. All in all, the TV business was much healthier than expected.

Even without the Super Bowl or March Madness, TV revenue increased one percent. That doesn't sound like much, but considering that this quarter was the one in which the impact of the strike was truly felt, one percent is a huge relief. The surprise was thanks largely to the syndication of successful CBS shows, which added about 280 million of incremental license fees. For instance, CBS struck an international deal to distribute its CSI series.

As expected, the outdoor advertising division continued to be strong and the radio division and publishing division continued to be weak. CBS owns Simon and Schuster, which last year benefited from publishing hit inspirational book The Secret in last year's first quarter. So while the numbers were a surprise--as was the fact that the international syndication could be so big--the trends were right in line with Wall Street Expectations.

CBS is a slow growth company that will ebb and flow with advertising trends. But it has a strong enough balance sheet that it could try to make an acquisition like the Weather Channel.

Its sister company Viacom (VIA) will likely show more growth when it reports its quarterly earnings, but CBS isn't as terrible as some people feared. Now all eyes are on whether Moonves will buy the Weather Channel, which is on the block.