Ratings, debt deal boost CBS stock

Broadcast 'leader' posts a 52-week high for shares

How CBS' scheduling gambles are paying off

NEW YORK -- CBS' fall ratings trends are delighting Wall Street as well as Eye network executives.

Cases in point from recent days: several bullish reports from analysts and a 52-week high for shares. The company's stock closed down slightly Thursday at $16.98 but was near a 52-week high of $17.42 set this week.

"CBS stock has been appreciating as its broadcast network has been the leader in the new TV season," Miller Tabak analyst David Joyce said Thursday, reiterating his "buy" rating and raising his price target on the stock from $18 to $21. "CBS has not canceled any new shows this season as its peers have, so there is less risk of using ad inventory for make-goods."

CEO Leslie Moonves recently sounded bullish notes on advertising trends going into next year, and Davenport & Co. analyst Michael Morris believes the early fall-season trends could provide more help.

"Solid early ratings have CBS well-positioned should the scatter market tighten," he said in boosting his 2011 network ad-growth forecast from 3% to 5%. That would be a $85 million benefit to the company's bottom line, he calculated. He has a $20 target and "buy" rating on the stock.

Morris suggested that Disney's ABC and News Corp.'s Fox might have to deliver make-goods to advertisers if ratings continue to trend below last season, which could benefit CBS and NBC. He also mentioned Time Warner, Discovery Communications and Scripps Networks as likely beneficiaries.

CBS Corp.'s recent refinancing of debt at lower rates is seen as another positive for investors. It could lead to a dividend increase or stock buybacks down the line, Wall Street observers suggest.

Nomura analyst Michael Nathanson this week launched his sector stock coverage with a "buy" rating and $22 target on shares.

"We see an emerging bull case for broadcast network owners like the CBS network, once seemingly inconceivable," he said. "The economics of broadcast TV are improving as retransmission fees are beginning to flow in, DVR usage adds incremental viewing and international program sales of first-run content is lifting production profitability."
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