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CBS Corp. First-Quarter Earnings Exceed Expectations

The company said it is doubling its quarterly dividend as CEO Leslie Moonves touted the outlook for the upfront advertising market and additional deals with digital content distributors.

NEW YORK - CBS Corp. on Tuesday reported a first-quarter profit that exceeded Wall Street expectations as revenue was nearly unchanged, but operating profit rose thanks in part to a new deal to share NCAA basketball tournament rights.

CBS Corp. also said it is doubling its quarterly dividend to 10 cents per share. CBS shares rose in after-market trading.

On an earnings conference call, president and CEO Leslie Moonves answered an analyst question about the status of Two and a Half Men and what it would mean if it didn't return to the fall schedule.

Otherwise, Moonves and his team on the call touted the advertising market outlook ahead of this year's broadcast TV upfront and the outlook for additional deals with online distributors similar to Netflix.

Moonves cited a "highly favorable climate" in the ad market ahead of the upfront with prices for network scatter, or last-minute ad buys, up 40 percent in the current quarter over last year's upfront. He predicted "solid" double digit upfront increases and even signaled that CBS already struck a couple of upfront deals at "a very, very good number," but didn't elaborate. Some analysts have also previously predicted ad rate increases of more than 10 percent for the biggest networks in this year's upfront.

TV station ad revenue is trending up in the low single digits in the second quarter despite tough political ad comparisons, and radio ad revenue is trending up in the mid single digit percentage range, according to management.

Asked about a recent library content deal with Netflix, Moonves said it is great to be in business with the streaming video provider and said a deal to bring CBS content to Netflix in Canada and Latin America could be struck soon.

He also said there will be additional online deal partners in the future. He mentioned Amazon.com and Blockbuster, which was acquired by Dish Network last week. Moonves said he doesn't think that Dish bought the video rental firm and its online video service to operate "a bunch of stores" that rent and sell "cassettes." He added: "They'll want our content."

The company posted earnings of $202 million, compared with adjusted earnings of $34 million in the year-ago period. Adjusted results for the first quarter of 2010 excluded restructuring charges of $57 million and $26 million of tax items. Including those one-time items, the company had a year-ago loss of $26 million.

Operating profit more than doubled from $210 million to $437 million, and earnings per share rose from 5 cents to 29 cents.

Revenue amounted to $3.51 billion, down minimally from $3.53 billion amid tough year-ago revenue comparisons due to the Super Bowl last year and more NCAA basketball tournament games in the year-ago period.

This year, CBS started sharing the NCAA rights with Time Warner networks, which reduced costs and made CBS's NCAA coverage more profitable while revenue declined.

Ad revenue declined slightly from $2.38 billion to $2.92 billion. Underlying ad revenue rose though - with network ad revenue up 12 percent adjusting for the Super Bowl and a higher number of NCAA games last year - as did non-ad revenue.

“Our first quarter performance was driven by strong underlying advertising revenue growth and increases in non-advertising revenue streams as we continue to maximize the value of CBS’s world-class content," said Moonves.

Despite some overtures from JCDecaux, the largest outdoor ad firm in the world, Moonves said his team isn't keen on selling the CBS Outdoor business, pointing out that the billboard division is performing well. But he said the company can always give his team a call.

“CBS’s first quarter performance demonstrates the extraordinary momentum we have created in our
businesses,” said executive chairman and controlling shareholder Sumner Redstone. “Our industry-leading content and multiplatform distribution continue to provide a competitive advantage that fuels our ongoing success. Going forward, I am very confident that the strategies employed by our management team will propel us to even greater heights throughout the rest of the year and beyond.”

Local broadcasting revenue rose 2 percent and operating income before depreciation and amortization increased 26 percent. Entertainment revenue decreased 4 percent due to the lack of the Super Bowl and the new NCAA deal, but OIBDA rose 85 percent. Cable networks revenue and OIBDA rose 7 percent and 51 percent, respectively.

On the conference call after the market close, Redstone said: "CBS is on a roll. I love it." He introduced Moonves as "my good friend" and a "genius."

Email: Georg.Szalai@thr.com
Twitter: @georgszalai