In March 2019, CBS Corporation (NYSE:CBS) released its earnings update. Generally, analyst forecasts seem bearish, with earnings expected to decline by 3.2% in the upcoming year against the past 5-year average growth rate of 5.8%. Currently with a trailing-twelve-month profit of US$2.0b, the consensus growth rate suggests that earnings will drop to US$1.9b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How is CBS going to perform in the near future?
The longer term expectations from the 24 analysts of CBS is tilted towards the negative sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
By 2022, CBS's earnings should reach US$1.7b, from current levels of US$2.0b, resulting in an annual growth rate of -4.0%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $7.38 in the final year of forecast compared to the current $5.2 EPS today. Contraction in the bottom line seems to suggest cost growth exceeding top-line growth of 4.8% in the next three years. With this high cost growth, margins is expected to contract from 14% to 9.7% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For CBS, there are three pertinent aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is CBS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CBS is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CBS? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.