CBS is more reliant on ads than any of the other media giants: the good news is that its results show a gradual ongoing recovery in the ad market.
Revenue came in at $3.5 billion, roughly flat with last year and a hair higher than expectations. Quarterly adjusted earnings were 25 cents per share, right in line with expectations. The message on the earnings call was that the business is gaining momentum, with CEO Les Moonves pointing out that each quarter in 2009 was better than the last.
Despite the fact that results were right in line with analyst projections, shares dropped immediately following the earnings announcement in after hours trading. This is likely because the stock has grown by more than four times since a low this past March; CBS has by far made the greatest percentage gains of any of the media companies. Plus, many of the other media giants surprised to the upside, setting up CBS for an earnings surprise as well.
Sumner Redstone said "the market is turning" and returned to his common refrain that "content is king and will always be king." Redstone (who's also chairman of Viacom VIA) said "there's no economic storm that a company like CBS can not weather." The problem though, is that CBS isn't just dealing with a weak economy and ad market, it's facing a fundamental shift in media, away from the traditional broadcast model, towards lower-cost more targeted internet ads.
The fact that CBS is leading in prime time ratings works to its benefit as the ad market recovers. TV advertising increased 8 percent from the year-ago quarter and ad rates are up 30 percent from the upfront ad sales period. Moonves pointed out CBS' huge Super Bowl ratings and ad rates and even made a dig at NBC's Jay Leno, praising CBS' David Letterman. Moonves also pointed out that the company has reduced its cost structure while growing retransmission fees (a battle News Corp most recently fought with Time Warner Cable over payment for Fox.)
Despite the fact that declines in outdoor advertising and radio dragged on results, Moonves was pretty optimistic. Though political ads were down this quarter, that should turn around as we head into mid-term elections. The Supreme Court ruling allowing companies to buy unlimited amounts of TV ads, should give CBS stations a boost.
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