CBS Corp. Beats Estimates With Higher Second-Quarter Profit
UPDATED: CEO Leslie Moonves is not concerned about the advertising outlook and fall competition from Fox's "The X Factor" as ad, retransmission and other revenue grew and a Netflix streaming video deal started to contribute.
NEW YORK - CBS Corp. on Tuesday reported a higher second-quarter profit that exceeded Wall Street expectations as TV advertising and other revenue streams continued to grow.
On a conference call, CBS Corp. president and CEO Leslie Moonves was asked if there is any sign that advertisers may back out of ad commitments amid continuing economic weakness and the country's debt issues. His company has seen "absolutely none of that," he told analysts on the call, later echoing that he hasn't seen the kind of sentiment that prevailed when the last recession started. "Japanese automakers are coming back" after the earthquake and tsunami, and the saved NFL season has brought "a shot in the arm," he added before concluding that CBS is not afraid and is looking forward to the fall season.
Network scatter ad rates continue to be up around 40 percent in the current quarter, and TV station ad sales are trending up in the low single digit range excluding political ads, management said as Moonves argued that the strong upfront selling season, which brought CBS mid-teen increases, will set the company up for strong ad growth next year.
Moonves on Tuesday was also asked if he was worried about fall season competition from new show The X Factor on Fox. "I'm not concerned," he replied. "We were sort of [American] Idol-proof." While he predicted that the new show would be "equally wonderful" and do "very well," the CBS Corp. boss also suggested that "it won't hurt us."
After the market close, the media and entertainment giant reported quarterly net earnings of $395 million, compared with $150 million in the year-ago period, or $176 million last year when excluding a debt extinguishment loss. Another widely followed profitability metric, operating income before depreciation and amortization, jumped 51 percent to $873 million.
Revenue rose 8 percent to $3.6 billion, slightly ahead of analysts' consensus estimate as traditional revenue, such as from advertising, grew as did revenue from such newer businesses as retransmission fees and digital distribution deals with the likes of Netflix.
Advertising revenue edged up 3 percent despite a tough year-ago comparison. The year-ago period had featured higher political advertising and higher revenue from the NCAA men's basketball tournament, which the company this year split with Time Warner networks.
CBS Corp. also recorded a 21 percent gain in content licensing and distribution revenue, which benefited from a recent licensing agreement with Netflix for the digital streaming of select library titles. A more recent deal with Amazon.com didn't contribute yet. Moonves predicted additional digital video deals and highlighted that satellite TV giant Dish Network after its recent purchase of Blockbuster is now looking to expand its online content offers. He also mentioned Apple, Google and Microsoft as potential content deal partners.
CBS Corp.'s affiliate and subscription fee revenue climbed 12 percent in the latest quarter driven by rate increases and subscription growth, as well as higher retransmission revenue from TV distributors, which has been a key focus for broadcasters.
The company's cable networks unit, which includes Showtime, reporting revenue and operating income growth, as did its local broadcasting business, which posted a 4 percent radio revenue gain and slight growth at the firm's TV stations.
The entertainment segment, which includes the CBS broadcast network and the TV studio, CBS Films, CBS Interactive and other operations, saw revenue increase 10 percent. The company said it was "driven by the new licensing agreement for the digital streaming of select library titles, the third-cycle domestic syndication sale of Frasier, higher retransmission revenues and growth in network primetime advertising." The gains were partially offset by the impact of the new programming agreement for the NCAA tournament, which resulted in lower revenue but higher profits.
“CBS’s second quarter performance built on our tremendous first quarter, posting strong results throughout each of our businesses,” said executive chairman Sumner Redstone in a statement. “The company continues to operate at an exceptionally high level as we remain focused on creating the absolute best content and distributing that content in strategic and profitable ways."
He also once again called Moonves a "genius" and "my very good friend."
Moonves in a statement called the latest results "extraordinary" and said they "demonstrate the power of the strategic actions we’ve taken to strengthen our business model.” He added: “We delivered stellar growth across every single key financial metric, nearing record levels in all profit measures."
Also on Tuesday's call, Moonves lauded new evening news anchor Scott Pelley for starting off well by attracting additional viewers to the CBS Evening News after taking over the newscast.
He also highlighted the performance of the book from kidnap victim Jaycee Duggard, published by CBS Corp.'s Simon & Schuster on July 12. About 240,000 digital copies of the book sold in the first two weeks sold, he said.
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