A drop off in 2007?
Merrill Lynch analyst Jessica Reif Cohen reiterated a buy on CBS' stock but also noted that 2007 could be a tough year for the media conglomerate. In a note issued today, the analyst commented on company guidance: "CBS reaffirmed its long-term targets of low single-digit growth in revenues, mid single-digit growth in operating income and high single-digit growth in earnings per share. However, it suggested that the station sales, difficult comparisons and higher stock-option expense would drive relatively flat revenue and operating income in 2007. Although we had yet to adjust for the station sales in our estimates, we believe this is somewhat weaker than our previously outlook."
During 2006, CBS disposed of its Paramount Parks divisions, announced plans to sell radio stations and shuttered broadcast network UPN. In the final quarter of 2005, CBS -- then part of Viacom -- wrote down the value of its TV and radio businesses and suffered a net loss of $9.2 billion compared to the last quarter of 2004.
Surprisingly, outdoor was the headline fourth-quarter performer for CBS, with revenue up 10%, from $527 million to $580 million. TV revenue rose 3% for the quarter to $2.56 billion and for the full year was $9.4 billion, up from $9.3 billion in 2005.
Ad picture less rosy
Full-year advertising revenue took a 1% plunge compared to the previous year, due partly to the closure of CBS' UPN. Fourth-quarter ad revenue grew only "slightly," according to the company's results statement.
During 2006, CBS network saw a drop in ad revenue and faced tough competition from NBC's Winter Olympics, ABC's Super Bowl and Academy Awards and Fox's "American Idol." Still, CBS remains the most-watched network in terms of total viewers this season and has performed well so far during the sweeps period among 18- to 49-year-olds watching "live." Live is the currency on which advertising is bought and sold, though broadcast networks also report live-plus-same day numbers to reflect DVR usage.
In other sectors, publishing rose to $252 million (up 7%) while radio fell 8% to $498 million. CBS also announced it would increase its quarterly shareholder dividend to 10% along with a $1.5 billion share-buy-back program.