Advertising Still Drives Media (CBS, TWX, CMCSA, DIS, VIA, PBS)

Judging by the earnings reports out this morning from some of America’s largest media companies, US consumers are soaking up more entertainment than ever and they’re willing to pay for it. Media heavyweights CBS Corp. (NYSE: CBS), Time Warner Inc. (NYSE: TWX), and Comcast Corp. (NASDAQ: CMCSA) all reported solid earnings and revenues this morning, while Viacom Inc. reports earnings on Friday and Walt Disney Co. (NYSE: DIS) reports earnings next Tuesday.

Based on what we’ve seen this morning, the media business is booming. We have already reviewed CBS’s earnings report. Time Warner reported adjusted EPS of $0.60, significantly better than the consensus estimate of $0.55. Revenues grew 10% sequentially, to $7.03 billion compared with an estimate of $6.81 billion. Comcast, which includes NBCUniversal for the first full quarter, posted adjusted EPS of $0.42, barely ahead of an estimate of $0.41. Pro-forma revenues rose 9.4% year-over-year to $14.33 billion, considerably above an estimate of $13.83 billion.

The headline news for both CBS was the strength of new licensing deals, while Time Warner focused on its content, not the least of which was the blockbuster final Harry Potter film. Comcast pointed out gains in high-speed internet services and other technical areas as well as double-digit growth at NBCUniversal.

None of these media companies spent much time talking about advertising, but that is their bread-and-butter. At CBS, advertising revenue grew by just 3%, but still accounts for nearly two-thirds of the company’s revenues. At Time Warner, advertising revenue grew 11%, while Comcast’s advertising revenue in all segments grew by nearly 18%.

While content-licensing deals continue to show the most growth at CBS, the company’s ad revenues are what float the boat. Comcast’s addition of NBCUniversal finally moves the advertising needle for that company as well. And Time Warner’s ad growth at its Turner networks came provided 40% of the company’s revenue growth.

Viacom is expected to post EPS of $0.85 on revenue of $3.52 billion for its June quarter. Disney-watchers are looking for EPS of $0.72 on revenues of $10.45 billion. Last quarter Disney missed EPS estimates, but the target has been falling to its current level for the last three months. Viacom’s earnings target is unchanged in the last three months.

Finally, the PowerShares Dynamic Media ETF (NYSE: PBS), which has been in free-fall for the past week ought to get a boost from the strong showing by the media companies. PBS closed yesterday at $13.88, in a 52-week range of $10.74-$15.77.

Paul Ausick