Earnings Preview: CBS Corporation (CBS)

CBS Corporation (CBS), a diversified media conglomerate, is scheduled to report its fourth-quarter 2010 financial results on February 16, 2011. The current Zacks Consensus Estimate for the quarter is 44 cents a share. For the quarter under review, revenue is pegged at $3,857 million, according to the Zacks Consensus Estimate.

Third-Quarter 2010, a Synopsis

CBS Corporation continued positive operating and cost-containment efforts to report strong third-quarter 2010 results, beating expectations. The quarterly earnings of 35 cents a share, surpassed the Zacks Consensus Estimate of 31 cents, and increased 40% year over year.

Revenue declined marginally by 2% to $3,297.5 million compared to the same quarter previous year. The revenue also fell short of the Zacks Consensus Estimate of $3,357 million. The decline in revenue this quarter was mainly attributable to the absence of the benefit of first-cycle domestic syndication sales of five major titles, in the year-ago quarter.

Revenue for the quarter was primarily helped by a 10% growth in advertising to $1991.3 million and 15% growth in affiliate and subscription fees to $408.2 million.

Fourth-Quarter 2010 Zacks Consensus

Analysts considered by Zacks, expect CBS Corporation to post fourth-quarter 2010 earnings of 44 cents a share. The current Zacks Consensus Estimate reflects a growth of 76% from the prior-year quarter earnings. The current Zacks Consensus Estimate for the quarter ranges between 40 cents and 47 cents.

Zacks Agreement & Magnitude

Of the 21 analysts following the stock, 2 analysts have revised their estimates upwards and 2 analysts have lowered their estimates in the last 30 days, leaving the Zacks Consensus Estimate virtually unchanged. In the last 7 days, none of the analysts have revisited their estimates.

Mixed Earnings Surprise History

With respect to earnings surprises, CBS Corporation has met as well as topped the Zacks Consensus Estimate over the last four quarters in the range of 0.0% to 19.1%. The average remained at 17.9%. This suggests that CBS has met or outperformed the Zacks Consensus Estimate by an average of 17.9% in the last four quarters. Given the past performance we expect the company either to meet or exceed the Zacks Consensus Estimate.

CBS Corporation in Neutral Lane

CBS Corporation has shown a positive comeback with each quarter in 2010 delivering higher profits than the previous quarters. The company is witnessing improving trends in the advertising marketplace due to renewed strength in the auto and financial services categories, rise in traffic at CBS Interactive sites and subscriber growth across Cable Networks.

The company hinted that political advertising will significantly benefit the fourth quarter of 2010. CBS remains confident about the growth momentum continuing in fiscal 2011. Management hinted that the margins are approaching the pre-recession levels. However, CBS’ high dependence on advertising revenue, which is driven by the health of the economy, is a significant risk.

To mitigate this, the company is striving to add diverse revenue streams to hedge against economic cycles. The retransmission and affiliate fees from CBS’s cable and satellite partners for the right to retransmit broadcast programming are non-advertising revenue.

Currently, we have a long-term “Neutral” rating on the stock. Moreover, CBS Corporation, which competes with News Corporation (NWS) and Walt Disney Company (DIS), holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating.

CBS CORP (CBS): Free Stock Analysis Report

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