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CBS Corp. Stock Gains After Time Warner Cable Carriage Deal

Les Moonves - H 2013
Monty Brinton/CBS
Leslie Moonves

The entertainment company, led by CEO Leslie Moonves, was seen as the winner in the showdown with the cable giant.

The stock of CBS Corp. rose more than 5 percent in Tuesday trading after the company announced a new retransmission consent and network carriage deal with Time Warner Cable late Monday.

After a month-long programming blackout, CBS, led by CEO Leslie Moonves, was widely seen as having received deal terms in line with its targets.

Shares of CBS were up 4 percent as of 2 p.m. ET at $53.13. The stock has traded as high as $55.58 over the past year.

Time Warner Cable's stock also rose slightly, up 1 percent to $108.40.

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"Importantly, the companies were ultimately able to reach an agreement through a free-market negotiation, which, though somewhat messy, is something we consider significant relative to concerns that regulators may become more involved in the future," wrote Davenport & Co. analyst Michael Morris in a Tuesday report.

He believes that the terms of the deal "reflect a step up in monthly retransmission rates consistent with those reached with other distributors," including a CBS agreement with Verizon FiOS struck late last month.

"We estimate $1.50 [paid] per household in 2014, reaching $1.90 in 2016," Morris wrote. "We currently forecast CBS will receive $461 million in retrans/reverse compensation revenue in 2013 and $639 million in 2014 as the company continues to negotiate new agreements with its distribution partners."

Wells Fargo analyst Marci Ryvicker argued that CBS came out the winner in the carriage showdown.

"While financial details were not disclosed, our gut tells us that this dispute favored content over distribution -- we hear that Time Warner Cable moved a lot further than CBS," she wrote Tuesday.

She decided not to change her financial estimates for TWC and CBS "as we believe CBS will receive payment retroactively." Ryvicker said that was "rare when stations go dark, but we don't think CBS' COO [Joe] Ianniello would budge on this issue."

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai