Shares of CBS Corp. got a boost Wednesday after the broadcasting company posted better-than-expected second-quarter results, driven by a rebound in local ad spending.
CBS reported net income nearly 10 times what it earned a year earlier, thanks to cost-cuts and higher revenue. The company saw ad sales rebound across the board, led by the automobile, telecommunications, retail, financial services and entertainment sectors.
Ad sales contracted sharply during the recession, hurting media companies like CBS. But the improving ad market benefits CBS more than other media companies because of its market-leading position as a broadcaster.
"Advertising shows no signs of slowing down," wrote Jefferies analyst Brian S. Shipman in a note to investors, keeping a "Buy" rating on CBS shares. He said the advertising momentum carried into the third quarter and raised his earnings estimates for 2010 and 2011.
Wedbush Morgan's James Dix said advertising growth continues to impress. But he added that it is not a leading indicator, so economic jitters "keep us on sidelines."
"With roughly (two-thirds) of its revenue coming from advertising, across a mix of national and local sources, CBS is the clearest play on the economic cycle among the diversified media names," wrote Dix, who has a "Hold" rating on the company's stock.
Shares of New York-based CBS rose 50 cents, or 3.3 percent, to $15.51 in late morning trading. In the past 52 weeks, the stock has traded between $8.46 and $16.98.
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