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CBS Corp. (CBS) Hits 52-Week High on Growth Catalysts

Zacks Equity Research

Diversified media conglomerate CBS Corporation CBS remains poised for growth as its long-term goals remain well on track. In fact, this Zacks Rank #3 (Hold) stock, which has an impressive earnings history hit 52-week high of $69.81 yesterday, though it closed a tad lower at $68.86.

Additionally, its shares have yielded a return of 26.9% in the past one year, outperforming both the Zacks categorized Broadcasting – Radio/Television industry and the broader sector. While the industry gained 15.6%, the Zacks categorized Consumer Discretionary sector returned 16.4%.


Let’s Take a Close Look

Moving ahead, CBS Corp.’s, sustained focus on increasing subscription-based revenues should drive long-term growth. The company also has an extensive library of premium content that it monetizes over multiple platforms. Evidently, it had launched over-the-top (OTT) services like CBS All Access and CBSN, and an independent streaming service for its premier channel, Showtime.

Further, management stated that both CBS All Access and Showtime OTT are anticipated to carry on with their rapid growth in the future. In fact, it aims to reach the target of 8 million subscribers’ base for CBS All Access and Showtime OTT together by 2020.

In addition, CBS Corp. came up with a new commercial-free subscription for its OTT services. The content will include the entire current seasons of primetime hits and subscribers can also view CBS All Access's on-demand library of over 7,500 episodes. This move is likely to enhance customers’ viewing experience, and in turn, improve company’s overall performance.

Notably, the company crossed $1 billion mark in revenues from retransmission consent and reverse compensation in 2016, a year before it expected earlier. In 2017, management projects retransmission and reverse compensation to increase 25% from the prior year. Further, it looks forward to achieve $2.5 billion of revenues from retransmission and reverse compensation by 2020.

Moreover, CBS Corp. has undertaken strategic deals that enable the company to meet the retransmission targets much ahead of the schedule. Recently, it also signed a multiyear content carriage agreement with the U.S. telecom behemoth Verizon Communications Inc. VZ, which allows the retransmission of CBS-owned television stations, CW affiliates, SHOWTIME, Smithsonian Channel, and CBS Sports Network on Verizon’s FiOS TV across the country. Also, the company is on track to merge its radio business with Entercom Communications Corp. ETM.

CBS Corporation Price and Consensus

CBS Corporation Price and Consensus | CBS Corporation Quote

Driven by these factors, CBS Corp.’s earnings have outpaced the Zacks Consensus Estimate for the eighth straight quarter, when it reported fourth-quarter 2016 results.

However, the company’s top line missed the Zacks Consensus Estimate in the said quarter after four consecutive quarters of revenues beat. Also, the same fell year over year due to decline in advertising and fall in content licensing and distribution revenues.

Key Pick

A better-ranked stock in the same industry includes Central European Media Enterprises Ltd. CETV, which has surged 32.7% in the past six months. Also, the stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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CBS Corporation (CBS): Free Stock Analysis Report
 
Verizon Communications Inc. (VZ): Free Stock Analysis Report
 
Entercom Communications Corporation (ETM): Free Stock Analysis Report
 
Central European Media Enterprises Ltd. (CETV): Free Stock Analysis Report
 
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