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Earnings Preview: CBS Corp.

Zacks Equity Research

CBS Corporation (CBS), one of the leading media company in United States and worldwide, is expected to release its second-quarter 2012 financial results on Thursday, August 2, 2012, after the market closes.

The Zacks Consensus Estimate for second quarter 2012 stands at 58 cents, flat year over year. The estimate lies between a low of 54 cents and a high of 64 cents. Revenue, as per the Zacks Consensus Estimate, is pegged at $3,543 million.

First Quarter Highlights

CBS Corporation posted better-than-expected first quarter 2012 results. Quarterly earnings of 54 cents per share were way ahead of the Zacks Consensus Estimate of 44 cents and surged 86% from 29 cents earned in the year-ago quarter.

Revenues jumped 12% year over year to $3,924 million. The growth was due to a 39% rise in content licensing and distribution revenues to $1,017 million along with a 5% increase in advertising revenues to $2,398 million. Moreover, affiliate and subscription fees rose 7% to $455 million. Total revenue also exceeded the Zacks Consensus Estimate of $3,780 million.

Agreement of Estimate Revisions

For the second-quarter of 2012, one and two estimates went up (out of 22) in the last 7 and 30 days, respectively, whereas two estimates were trimmed in the last 30 days. For fiscal 2012, out of 25 estimates, two and seven estimates were revised upwards over the last 7 and 30 days, respectively, and two estimates went down in the last 30 days.

Magnitude of Estimate Revisions

Due to the lack of near-term catalysts impacting the estimates directly or indirectly, the estimates remained unchanged at 58 cents over the last 7 and 30 days for the to-be-reported quarter, whereas for fiscal 2012, the estimates went up by a penny over the last 30 days.

Positive Earnings Surprise History

CBS Corporation has been performing well, reflected by the better-than-expected results over the last four quarters. With respect to earnings surprise, CBS Corp has outperformed the Zacks Consensus Estimate with an average of 17.0% over the last four quarters. Looking at the company’s past performance, we expect CBS to top the estimates in the coming quarters as well.


CBS, which competes with News Corporation (NWSA) and Comcast Corporation (CMCSA), has been actively managing its cash flows by generating healthy free cash, making prudent capital investments and enhancing shareholders’ return.

The company generated free cash flow of $607 million, incurred capital expenditures of $39 million, repurchased shares worth of $269 billion in the first quarter and ended with cash and cash equivalents of $794 million.

The company’s decision to increase its share repurchases authorization and dividend clearly suggests the ability to generate liquidity and its potential to improve in the long run.

CBS remains well positioned to drive revenue growth in the coming quarters through its strategic initiatives and operating efficiencies. Management remains optimistic and expects growth momentum to continue in fiscal 2012 based on reverse compensation from affiliates, strong demand of its content and online video streaming, retransmission consent, and political advertising.

Based on better-than-expected results and ability to generate strong free cash flow, CBS Corporation carries Zacks #2 Rank, implying a short-term Buy rating. We also maintain our long-term Outperform recommendation on the stock.

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