CBS Stock Hits All-Time High Since Viacom Split

6:43 AM PST 01/17/2013 by Georg Szalai

Analysts cheer planned changes at its outdoor advertising unit, which will reduce the company's exposure to advertising, says one observer.

The stock of CBS Corp. rose more than 10 percent in early Thursday trading to hit a 52-week high following late Wednesday news that the entertainment company was planning two changes to its outdoor advertising business.

CBS, led by CEO Leslie Moonves, said it would look to sell its international billboard business and converts its U.S. outdoor arm into a so-called Real Estate Investment Trust.

As of 9:40 a.m. EST on Thursday, the stock was up 10.7 percent at $41.95 after hitting a 52-week high of above $42. On Jan. 2, the stock had reached its previous 52-week high of $39.77. Thursday's high was also the stock's highest price since at least its split from Viacom at the start of 2006.

Analysts lauded the planned changes in the outdoor ad unit and in many cases boosted their price targets for the company's stock.

Wells Fargo analyst Marci Ryvicker reiterated her "outperform" rating, similar to other analysts' "buy" recommendations, and raised her valuation range for CBS shares to $45-$47 from $43-$45. "The REIT conversion is the real value driver here in our view -- although the international sale is nice too," she said.

Pivotal Research analyst Brian Wieser concurred, estimating that the sale of the international outdoor arm could be worth $1 billion. He raised his stock price target from $49 to $51. "As more details become available, further upside may become more readily evident," he said.

"This news may highlight the potential for additional asset pruning (i.e. by way of selling the company's book division, Simon & Schuster)," he also suggested. "Disposing of outdoor advertising will have the effect of reducing the company's exposure to advertising, long a source of volatility for the company's operating results."

During the third quarter, if one excludes outdoor from the company's revenue, advertising would have accounted for less than half of total revenue at 49.2 percent, he highlighted.

Sanford C. Bernstein analyst Todd Juenger in the headline of his report said: "REIT Conversion Doubles Value of Outdoor Overnight." As a result, he raising his target price on CBS Corp.'s stock by $4 to $43.

Michael Nathanson, analyst at Nomura, reiterated his "neutral" rating on CBS shares, but also raised his price target to $44. "We expect CBS will get a deserved pop on this accretive action" in stock market trading, he said.

And Evercore Partners analyst Alan Gould reiterated his "overweight" rating on CBS shares, saying: "Les Moonves has been transforming CBS to be more a content company. The outdoor division is a good cash flow business, but not a strategic asset."

He called the planned changes "a positive move in enhancing shareholder's value."

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

 

comments powered by Disqus