What CBS Still Has Going for It

By Trey Thoelcke Published May 9, 12:15PM EDT

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Shares CBS Corp. (NYSE: CBS) retreated Friday morning, following the media company’s first-quarter report late Thursday. At issue was a 9% year-on-year decline in CBS’s entertainment division to $2.3 billion, which helped drive overall revenues down 5% to $3.86 billion, shy of analysts’ consensus projections.

But the New York-based company also said per-share earnings came to $0.75, a 6% rise from a year ago and higher than analysts had expected. Profits received a boost from increased licensing of the company’s programming, 6% higher than a year ago, and higher payments from cable and satellite operators that carry CBS channels, a 9% gain. Demand in international markets for hit shows such as “NCIS” and “The Good Wife” was strong.

While advertising was down 12% in the first quarter, due largely to not having the Super Bowl this year, the broadcaster expects heavy spending on political advertising for mid-term elections, particularly in Florida and Michigan, to be a boost in the second half of the year.

More original programming over the summer, Thursday Night Football in the fall season and higher ad rates also are expected to boost revenue in the second half of the year.

In addition, the conversion of CBS Outdoor Americas Inc. (NYSE: CBSO) to a real estate investment trust and the subsequent spin-off brought in about $5 billion to CBS, which it may use for buybacks and potential acquisitions.

For investors who see hope in CBS’s reduced reliance on the volatile advertising market in favor of increased fees from cable, satellite and Internet video providers may see the post-earnings pullback as an entry point. Note that shares are down more than 12% year to date after falling 5% to $55.09 Friday morning. Shares have traded in a range of $45.61 to $68.10 in the past year. Analysts have a mean price target of $63 for the shares.

By mid-day Friday, total option volume in CBS had already exceeded its full-session average for the past month. Calls were outpacing puts by nearly three to one, signaling an expected rebound.

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About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.