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CBS Q2 Earnings & Revenues Increase Y/Y, Beat Estimates

Zacks Equity Research

CBS Corporation CBS reported second-quarter 2019 adjusted earnings of $1.16 per share that increased 3.6% from the year-ago quarter. The reported figure also beat the Zacks Consensus Estimate by 3 cents.

Revenues increased 12.9% from the year-ago quarter to $3.81 billion, surpassing the consensus mark of $3.71 billion.

Advertising revenues (37.4% of total revenues) climbed 7.3% year over year to $1.42 billion. CBS’ broadcast of the national semifinals and championship game of the NCAA Division I Men’s Basketball Tournament positively impacted advertising revenues.

Content licensing & distribution revenues (11.7% of total revenues) were up 11.7% to $1.22 billion, backed by higher domestic licensing sales.

Affiliate and subscription fees (29.2% of total revenues) jumped 23.9% year over year to $1.11 billion. Robust performance from direct-to-consumer services, CBS All Access and Showtime, were major revenue growth drivers.

CBS remains on track to reach its goal of 25 million subscribers in direct-to-consumer services (on a combined basis) by 2022.

CBS Corporation Price, Consensus and EPS Surprise

CBS Corporation Price, Consensus and EPS Surprise

CBS Corporation price-consensus-eps-surprise-chart | CBS Corporation Quote


Moreover, increases in fees from CBS Television Network affiliated stations and retransmission revenues, driven by virtual MVPDs, stoked top-line growth.

However, other revenues declined 11.1% year over year to $48 million.

Furthermore, adjusted operating income inched up 1.2% year over year to $702 million, driven by higher revenues. However, operating margin contracted 160 basis points (bps) to 18.4%.

Segment Details

Entertainment revenues (72% of total revenues) increased 14.1% year over year to $2.74 billion.

This solid year-over-year upside was backed by 9% increase in advertising revenues, 18% growth in content licensing and distribution revenues, and 22% improvement in affiliate and subscription fee revenues.

Entertainment operating income increased 16.1% year over year to $426 million owing to higher revenues.

Cable Networks’ revenues (14.8% of total revenues) went up 1.6% to $562 million. Increased revenues from Showtime digital streaming subscription offerings as well as contribution from Pop fueled top-line growth.

Notably, CBS acquired a 100% stake at Pop in March 2019.

However, Cable Networks operating income decreased 24% year over year to $185 million due to lower licensing revenues. In addition, increased investments in programming, including costs associated with the premieres of the new series City On A Hill and the limited series The Loudest Voice, negatively impacted profitability.

Publishing revenues (5.7% of total revenues) of $218 million increased 5.3%, aided by print book and digital audio sales. The bestselling titles in second-quarter 2019 were Howard Stern Comes Again by Howard Stern and The Pioneers by David McCullough.

Publishing operating income advanced 6.5% to $33 million on the back of stellar top-line growth.

Local Media revenues (11.1% of total revenues) climbed 0.7% to $423 million, primarily supported by higher retransmission fees and increased advertising revenues owing to the NCAA Tournament broadcast.

Local Media operating income increased 1.6%, year over year, to $130 million, driven by solid revenue growth.

Balance Sheet & Cash Flow Details

As of Jun 30, 2019, cash and cash equivalents were $216 million compared with $500 million as of Mar 31, 2019.

Additionally, as of Jun 30, 2019, long-term debt was $9.36 billion, unchanged from Mar 31, 2019.

Operating cash outflow in the June-end quarter was $124 million compared with $438 million reported in the previous quarter. Free cash outflow was $157 million compared with $411 million reported in the prior quarter.

Zacks Rank & Stocks to Consider

CBS currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader consumer discretionary sector are Glu Mobile GLUU, Comcast CMCSA and Shaw Communications SJR, carrying a Zacks #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate for Glu Mobile, Comcast and Shaw Communications is pegged at 15%, 11.9% and 5%, respectively.

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