CBS CBS Corp

CBS Corporation (CBS), a diversified conglomerate, has marked its presence virtually in every sphere of media and entertainment through its divisions, and remains focused in creating a business environment that nurtures diversity.

Born out of parent company Viacom in 2005, CBS Corporation’s operating divisions comprise CBS Television Network, CBS Interactive, The CW Network, Showtime, CBS College Sports Networks, Local Television and Radio Stations, CBS Outdoor and Simon & Schuster (publishing).

CBS Corporation has been focusing on containing costs, building operating efficiencies and taking strategic measures, which together helped the company to post better-than-expected third-quarter 2011 results. The company posted earnings of 50 cents a share that beat the Zacks Consensus Estimate of 46 cents and surged 43% from the year-ago quarter.

Revenue inched up 2% year over year to $3,365 million, which is quite a healthy figure as the reported quarter lacked significant political advertising revenues that benefited the prior-year period.

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

Due to its exposure in publishing, radio and television broadcasting, and outdoor billboard businesses, CBS remains highly susceptible to the advertising market. To mitigate this, the company is striving to add diverse revenue streams to hedge against economic cycles.

The retransmission, affiliate and online distribution fees have been non-advertising-driven revenue and will become a significant growth driver for the top and bottom lines. CBS is eyeing more than $250 million in retransmission fees in fiscal 2012.

CBS has been also 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 $29 million, incurred capital expenditures of $57 million, repurchased shares worth of $350 million and ended the quarter with cash and cash equivalents of $947 million.

Year-to-date, CBS has bought back a total of $850 million of shares under its previously authorized $1.5 billion program. Further, the company also announced a $1.5 billion increase in its existing share buyback authorization. CBS added that it expects to complete the remaining authorization under its previous $1.5 billion program, and the increased $1.5 billion authorization by the end of 2013.

The above analysis supports our affirmative view on the stock, and therefore we uphold our Outperform recommendation on CBS Corporation. CBS shares’ holds a Zacks #2 Rank that translates into a short-term ‘Buy’ rating.

 
CBS CORP (CBS): Free Stock Analysis Report
 
Zacks Investment Research