CBS Quarterly Earnings Exceed Expectations on Political Advertising

Les Moonves Vanity Fair Oscars After Party - H 2013
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Les Moonves Vanity Fair Oscars After Party - H 2013

The company posted $3.37 billion in revenue while analysts expected $3.32 billion

CBS on Wednesday reported third-quarter earnings of $3.03 cents per share on $3.37 billion in revenue, beating Wall Street's expectations due in part to political advertising and Thursday Night Football.

CBS was expected to earn 73 cents per share on revenue of $3.32 billion. The huge discrepancy in the per-share earnings are owed to a $1.56 billion gain recognized in connection with the company's split-off of its billboard business, Outdoor Americas. When adjusted for that event, CBS beat per-per-share earnings expectations by a penny.

Despite the fairly strong report, CBS acknowledged "softness in the overall advertising marketplace" and, in doing so, echoed a concern this earnings season among analysts and media executives. So far this week, for example, Discovery Communications and 21st Century Fox each reported sluggishness in TV ad sales.

Revenue that CBS attributed strictly to advertising rose 1.6 percent quarter-over-quarter, while revenue associated with affiliate and subscription fees were up 4.3 percent. Content licensing and distribution, though, fell fractionally.

Among the conglomerate's reporting segments, local broadcasting fared best in terms of revenue, which was up 6 percent to $680 million. Cable Networks was next, with a gain of 5 percent to $624 million. Entertainment, which is made up of the CBS TV network and studios as well as the distribution group, interactive and CBS Films, was up 1 percent to $1.91 billion. Publishing dropped to $199 million from $224 million.

"I am particularly pleased with the CBS Television Network's encouraging start to the fall season, which has reloaded our owned content pipeline in a big way with Madam Secretary, Scorpion and NCIS: New Orleans," CEO Les Moonves said Wednesday.

At the start of a conference call on Wednesday, 91-year-old executive chairman Sumner Redstone was barely audible and spoke only a few seconds, just long enough to introduce Moonves.

Moonves told analysts on the call that CBS was on course to post $2 billion in retransmission and reverse compensation revenue by 2020. Moonves also said that the next deal on his plate would be a new one with Dish Network, which is in a carriage dispute with Time Warner's Turner Broadcasting.

CBS "is determined to get fair value" from Dish, Moonves said. "We are in discussions with them as we speak." The current deal with Dish expires at the end of the month.

The chief executive also lamented that a one-year deal for Thursday Night Football was marred by "four blowout games," but it was nevertheless a big success. "The NFL does have an option, we hope they pick it up," he said.

Moonves also confirmed a relationship with Sony Corp. to provide content to that company's streaming service, which is still in the works. Viacom, a sister company to CBS, also has a deal with Sony for the same service. He also touted the upcoming launch of CBSN, a news feed for digital outlets.

Moonves also joked that he was so pleased with the revenue generated from political advertising during the quarter that he phoned the White House and asked the president to postpone the midterm elections for another week, but he wouldn't go for it.