CBS Downgraded on 'Unimaginable' Local-Ad Declines

Bernstein Research Says Downturn Will Hurt TV, Radio, Outdoor

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NEW YORK ( -- CBS Corp. took a whack from investment firm Bernstein Research, which downgraded the broadcaster's stocks today to "underperform" in anticipation that the company will have to cut its dividend to keep its investment-grade credit rating.

Bernstein reduced its 12-month price target from $8 to $6 a share; CBS shares fell 3.5% to $6.30 in morning trading on the New York Stock Exchange.

"Local ad trends continue to shock us with unimaginable rates of decline," said Bernstein media analyst Michael Nathanson in a research note.

Local business hit hard
CBS has long reaped strong cash flow from its local ad businesses such as TV, radio and outdoor, but those have been hit hard in the current economic downturn, and Bernstein believes CBS will have to cut its dividend to conserve cash.

Mr. Nathanson expects non-political revenue at CBS's owned-and-operated stations to fall 15% in 2009; radio revenue is expected to fall 25%; and North American outdoor revenue will fall by 10%. CBS is the most-watched TV network, but Bernstein predicts network revenue will fall 6% in 2009.

According to Standard & Poors, CBS has $1.6 billion of debt expiring in 2010.

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