Analysts bullish on CBS Corporation (NYSE: CBS)

CBS Corporation (NASDAQ: CBS) reported fourth quarter results beating street estimates helped by higher political advertising and a rise in retransmission revenue. Advertising sales which contributes around 50% of total revenue fell  by 2.8% to $1.8 billion.  The advertising revenues were benefited from political spending at local television stations in the wake of U.S. presidential elections late last year. On the other hand, The fall in advertisement revenues were on account of fewer NFL Thursday night football games in the reported quarter as well as lower-than-expected rating for those games.  Furthermore, CBS, which is home to popular shows such as ‘NCIS’ and ‘The Big Bang Theory’ has been facing a slowdown in its advertising revenue as advertisers shifts more dollars from TV to online. As a result, the stock is trading subdued this morning and fell over 0.4% (As of  1:16PM EST on Feb 16th, 2017; Source: Google finance).

But, analysts from Guggenheim reiterated their buy rating on the stock this morning. The stock has consensus rating of “Strong Buy” with a target price of $68.5.

For the reported quarter, the company posted revenues of $3.52 billion compared with $3.59 billion for the corresponding quarter. Affiliate and subscription fee revenues increased 13%, led by growth in retransmission revenues, fees from CBS Television Network affiliated stations and digital distribution services. Operating income for the fourth quarter was $484 million compared with $770 million, affected by a one-time pension settlement charges in the fourth quarter of 2016 and gain from sale of internal business in China in Q42015. Adjusted operating income of $733 million for the quarter was higher by 10% in corresponding quarter primarily driven by high margin revenues.

Net earning from continuing operations were $271 million for the period compared with $507 million in the corresponding period.  The company however has reported a loss of $113 million compared to profit of $261 million. Adjusted net earnings increased 9% to $476 million from $436 million in the same period last year, driven by higher adjusted operating income. Adjusted EPS for the quarter grew 21% to $1.11 from $0.92. During the quarter, the company repurchased 25.4 millions of its shares for $1.5 billion.

For the full year, the company reported revenues of $13.17 billion, up 4%. Adjusted operating income was at $2.86 billion, up 12%. Net income from continuing operations were $1.55 billion  and adjusted net earning was up 14% to $1.84 billion compared with $1.62 billion in 2015.

CBS signed deals with Hulu and Alphabet Inc’s Google to be included in their upcoming streaming video services which are expected to go live in the next few months. The company has also signed a deal with Verizon Communication Inc  to distribute its content, including its Showtime premier cable channel. The management said the company is on track to exceed its goal of having 8 million subscribers for its online streaming video services, All Access, and its online streaming Showtime service by 2020. The company also announced its plans to merge it radio business with Entercom Communications Group. The merger would create a well capitalized company with a market cap in excess of $ 2 billion. The company expects to complete the transaction in second half of 2017.




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