CBS Corporation (CBS - Analyst Report) reported first-quarter 2015 earnings per share from continuing operations of 78 cents that topped the Zacks Consensus Estimate of 75 cents.
CBS Corporation - Earnings Surprise | FindTheCompany
However, total revenue fell 2% to $3,500 million and missed the Zacks Consensus Estimate of $3,502 million due to weakness across board. Advertising revenues fell 4.8% to $1,784 million due to fewer NFL games and lower revenues at the Local Broadcasting segment. Content licensing and distribution revenues fell 4.2% to $1,028 million. Nearly an 11% growth in affiliate and subscription revenues to $628 million could not provide much relief.
Operating income, too, decreased 11.3% to $702 million in the face of higher programming costs and increased investments as the company continues to bring newer shows on CBS broadcast network and Showtime.
Segment wise, Entertainment revenues fell 1.8% to $2,261 million owing to lower content licensing fees that offset increase in advertising affiliate and subscription fees. The segment’s operating income also fell 17.6% to $346 million due to increased investment in television content.
Cable Networks revenues rose marginally to $539 million due to higher licensing and affiliate fees. The segment’s operating income decreased 1% to $254 million.
Publishing revenues were down 5.2% to $145 million due to lower print book sales. The segment’s operating income was up 9% to $12 million because of lower selling costs.
Local Broadcasting revenues were down 4.8% to $596 million in the quarter on lower advertising while the segment’s operating income fell 10% to $161 million. CBS Television Stations’ and CBS Radio’s revenues declined 3% and 7%, respectively.
Other Financial Details
CBS Corp. ended the quarter with cash and cash equivalents of $331 million, long-term debt of $7,693 million, and shareholders’ equity of $6,397 million. For the quarter, the company generated net cash flow from operations of $417 million and incurred capital expenditures of $17 million. Free cash flow generated during the quarter was $400 million, substantially down from $520 million generated in the year-ago period.
CBS Corp. is focused on lowering its dependency on conventional advertising, which is commendable since it is highly susceptible to economic headwinds. Separation of CBS Outdoor Americas Inc. was a step in this direction.
Also, the company is focusing on enhancing its non-advertising revenue streams, like reverse compensation from affiliates, content monetization, digital distribution, syndication sales and retransmission fees, to boost its revenues.
CBS Corp. continues to expect retransmission fees to hit the $2 billion mark in 2020. Significant deals in the pipeline make the company positive about achieving its target.
CBS Corp. is currently a Zacks Rank #3 (Hold) stock.
Other Stocks to Consider
Better-ranked stocks in the media/publishing sector include AMC Networks Inc. (AMCX - Snapshot Report), CTC Media, Inc (CTCM - Snapshot Report) and The E. W. Scripps Company (SSP -Snapshot Report). AMC Networks sports a Zacks Rank #1 (Strong Buy), whereas CTC Media and The E. W. Scripps Company hold Zacks Rank #2 (Buy).
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