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CBS Corporation (CBS)’s Earnings Announcement in Detail

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CBS Corporation (NYSE:CBS) posted adjusted share EPS of $0.64, versus $0.57 in the prior-year December quarter. Growth was driven by higher advertising sales, as well as affiliate fees. But, as someone who sees the company’s stock for its long-term value, the notable portions of the earnings call were CBS’s plans on how it will sustain profit gains over the quarters and years subsequent to this. I believe the management aims to boost shareholder returns, while updating its businesses for continued solid performances. As such, earnings are likely to remain on an upward path.

Network Programming Plans

CBS, already responsible for the vast majority, 17 of the top 20 in a recent week, of the most-watched programs on television, is building an unusually new slate of summer series. Such upcoming broadcasts will include the miniseries Under the Dome, and seasons of Big Brother plus Unforgettable. It also hinted at another reality series to be premiered. The gist is that the typically slow summer TV schedule may well support ratings better than anticipated this year.

On the cable television side, it is capitalizing on investments in Showtime hits such as Dexter and Homeland, while bringing new series to that premium network that should attract viewers and thus subscribers. Indeed, Cable Networks segment operating income rose to $185 million in the fourth quarter, up from $175 million, a 6% jump.

Moving on to syndication, CBS has an impressive library of network series to sell to cable. Some of these for 2013 are NCIS: Los Angeles, and The Good Wife, while Hawaii Five-O and Blue Bloods will go into syndication in 2014. Its cable shows are apt to gain audiences in the U.S. and internationally, too. In all, CBS’ programming can carry it for now and years to come on cable.

Two Significant Deals

CBS is securing its profitability through changes in its revenue stream. Recently, for instance, it renewed and expanded its streaming agreement with Amazon.com, Inc. (NASDAQ:AMZN) Amazon operates a video-on-demand service broadcasted on the Internet. Furthermore, CBS is divesting its European and Asian Outdoor business, while transforming its U.S.-based outdoor unit to a REIT. The transactions ought to allow for a faster-growing top line over the coming years. Retransmission revenue increases are another potential source of enhanced growth that management discusses.

Bolstering Share Earnings

A 2012 debt refinancing is resulting in reduced interest costs. Also, cash continues to be utilized for share buybacks, and a modest dividend. The benefits of these activities flow to the bottom line. CBS is thus poised for earnings growth when the operating environment is positive, specifically when ad spending by large groups such as automakers, financial services firms, and retail firms, among others, is rising. A more thorough overview of why CBS might well have profit upside over the 3- to 5-year stretch can be found in my earlier blog: “CBS as a Long-Term Holding.”

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