Tags: CBS | robust | U.S. | recovery

CBS Growth Will Rely on Robust U.S. and European Recovery

By    |   Friday, 29 June 2012 02:04 PM

CBS (CBS) makes most of its money in programming, making its prospects dependent on advertising in a down economy. Nevertheless, a growing digital effort has allowed the company to diversify income, offsetting bumps along the way, analysts point out. Continued growth will rely on a robust U.S. and European recovery, however, in order to support ad rates.

CBS is a mass media company with reach into programming through the CBS networks, cable programming including Showtime, CBS Sports and Smithsonian Network, the publisher Simon & Schuster, broadcasting via 29 company-owned local TV stations and 130 radio stations, and an outdoor advertising arm.

During fiscal 2011, programming was 52 percent of revenue, cable 11 percent, publishing 6 percent, local broadcasting 19 percent and outdoor 13 percent. About 15 percent came from international operations, largely Europe and secondarily from Canada..

“As technologies for delivering content and services evolve, the company continues to pursue and expand upon opportunities to distribute its content to consumers, in the U.S. and internationally, on various platforms, including the Internet, mobile devices and video-on-demand, among others,” management said in a recent filing.

“The company is also pursuing opportunities to diversify its revenue streams, including from retransmission consent fees from cable and satellite operators and direct broadcast satellite and other distributors.”

CBS has a market cap of $19.21 billion in a sector, media, where the average company size is $9.31 billion. Its trailing 12-month P/E ratio is 14.77 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.03.

Its projected earnings per share growth for the coming year is 13.25 percent, compared to a sector average of 18.42 percent.


Analysts are bullish on CBS, with buy or outperform calls from Ford Equity Research, Standard & Poor’s Equity Research, Piper Jaffray, Citigroup Investment Research, Deutsche Bank, and Zacks Investment Research.

“Management remains confident about continued growth momentum in fiscal 2012. However, the significant potential risk is CBS’s high dependence on advertising revenue, which is driven by the health of the economy,” said Zacks analysts in a note dated May 28.

“To mitigate this, the company is striving to add diverse revenue streams to hedge against economic cycles, which include retransmission fees, syndication sales and streaming deals. Further, CBS’s substantial liquidity, positions it to drive future growth and enhance shareholders’ return.”

CBS next reports on Aug. 2.

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