CBS Second-Quarter Profit Rose 8.1% as Advertising Slid
CBS Corp. (CBS), owner of the most-watched television network, reported an 8.1 percent increase in second- quarter profit, beating analysts’ estimates by holding down costs as advertising sales slipped.
Net income climbed to $427 million, or 65 cents a share, from $395 million, or 58 cents, a year ago, New York-based CBS said yesterday in a statement. Analysts had projected profit of 59 cents, the average of 28 estimates compiled by Bloomberg.
CBS countered a 3.1 percent drop in revenue with higher- margin affiliate and subscription fees, and reduced interest expenses. The TV network, with 12 shows among the 25 most- watched on broadcast television, is projected to finish first in the new season, in both total audience and in prized 18-49 age group -- positioning the company to capture more revenue from the presidential election.
“CBS is increasingly benefiting from the steps we’ve taken to improve our business model,” Chief Executive Officer Leslie Moonves said on a conference call. “The good news is there’s still a long way to go in our evolution.”
Second-quarter sales fell to $3.48 billion from $3.59 billion, missing the $3.53 billion average of 25 analysts’ estimates. Advertising, which makes up more than 60 percent of revenue, slipped 3.3 percent to $2.14 billion, partially due to lower television spending by retailers and financial firms.
Year-earlier results were bolstered by the March Madness college basketball tournament and payments from Netflix Inc. (NFLX) for streaming rights to TV shows, the company said.
Third-quarter broadcast revenue will rise by a “high single digit” percentage, Chief Financial Officer Joe Ianniello said on the call. Local TV stations, buoyed by record political campaign advertising, will see revenue in the period rise by a “high teens” percentage, and automotive companies, the company’s biggest source of ads, are spending more, he said.
CBS would consider offers for TV stations outside the top U.S. markets, Moonves said.
“We’ve always said we’re a big market television company and we have a few stations outside the top 15, so if the right offer came along, once again, we would absolutely look at it,” Moonves said.
Operating income before depreciation and amortization, a measure of profit watched by CBS analysts, rose 3.2 percent to $901 million. The company cited bigger returns on television licensing revenue and growth in high-margin affiliate and subscription fees.
Profit at CBS Entertainment, the division that includes the broadcast network, fell 3.8 percent to $385 million.
Led by “NCIS” and “The Big Bang Theory,” CBS finished the television season in May with the largest total audience and the second-most viewers ages 18-49, trailing News Corp. (NWSA)’s Fox in the group most-sought by advertisers.
The network collected about $2.7 billion in advertising commitments for the new season. The strength of the lineup, which includes the Super Bowl in February and a key National Football League playoff game, should ensure that CBS wins in the younger age group, Brad Adgate, director of research at ad agency Horizon Media in New York, said in May. It would be the network’s first victory in both categories in two decades.
The cable networks division that includes the Showtime channel and CBS Sports Network reported a 7.6 percent increase in profit to $184 million in the second quarter, while local TV and radio stations booked a 10 percent increase.
Operating profit from the billboard unit rose 50 percent to $39 million, while the Simon & Schuster publishing division slid 59 percent to $7 million.
CBS is considering selling the outdoor division. The company permitted bankers to solicit potential buyers for the unit, a person with knowledge of the situation said in June. The company is seeking about $6 billion for the business, the Wall Street Journal reported at the time.
On July 26, the company boosted its quarterly dividend by 20 percent to 12 cents and increased its share repurchase program to $4.7 billion, with the aim of completing the buybacks by the end of 2014.
With the buybacks, the dividend and profit generators such as the Super Bowl and new syndication deals, the company will continue to return cash to shareholders, Moonves said.
“Even with the larger buy-back program, the increased dividend, we still have headroom due to our very healthy levels of free cash flow,” Moonves said. “We’re very optimistic about our long-term prospects.”
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