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CBS Earnings: In-line with Expectations on Ad Strength

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AP

"What a difference a year makes."

That's how Sumner Redstone, chairman of CBS kicked off the company's first quarter earnings call.

The economy is improving, which is bolstering the ad market, and Redstone says: "No company today is poised to benefit from the improving economy more than we are." CBS relies on advertising more than any other network, which this quarter is a distinctly good thing. Total ad revenue is up 17 percent this quarter over last year to $2.38 billion, thanks largely to the unprecedented popularity of the Super Bowl. But even without the Super Bowl, ad revenues showed high single digit percentage gains.

The company reported 5 cents in adjusted earnings-per-share - right in line with expectations, and up from an eight cent-per-share a year ago. Revenue came in higher than expected: $3.53 billion, up 12 parent from a year ago. A lower cost structure is helping the company eke out higher margins as it grows revenue. And this quarter the company was able to buy back much of its debt, to secure lower financing costs.

The local ad market is coming back. Local Broadcasting showed 19 percent growth. The entertainment division added 15 percent more revenue than last year. And like the rest of the media giants, cable is robust -- CBS' cable division, which notably includes Showtime, added 8 percent.

The outlook is positive going into the upfront ad-sales period - CEO Les Moonves saying that the ad market has improved significantly and that this month's Upfront ad sales period "will be the strongest one in years. TV network is "enjoying a robust scatter market" and that being in first place in terms of ratings will help the company tap into the return of advertisers to this year's Upfront. The fact that CBS has finalized its deal with the NCAA to extend the contract through 2024 also provides more visibility for sports-related ad revenue going forward.

And now retransmission fees will provide a dual revenue stream for broadcast programming, which previously relied solely on ad revenue. Moonves boasted that the company has long worked to develop a dual revenue stream and now that re-transmission payment is a reality.

Ad revenue at CBS Interactive gained 19 percent over last year. Outdoor revenues increased a more modest 3 percent -- but that's a result of positive foreign exchange rates. Excluding that factor, revenues dropped 1 percent. Publishing - i.e. Simon & Schuster, was CBS' worst division, reporting a 6 percent decline in revenues on the weak retail environment. Moonves defended the performance of its new film studio, CBS Films, saying that the performance of its second film "Backup Plan" had a respectable run, better than the first movie.

Moonves says he'd like to sell some of the radio assets - CBS Radio revenues grew 9 percent over last year. Moonves says there's nothing he's interested in buying. There was some talk on the earnings call about how CBS will return cash to shareholders -- it has $873 million in cash and cash equivalents on its balance sheet. For now it's focused on keeping costs low so it can leverage the higher revenues. Now all eyes will be on how Upfront ad buys come in and what kind of growth CBS can secure in terms of retransmission fees going forward. Moonves wouldn't comment on the news that the company is in talks with CNN about consolidating news-gathering efforts, which would certainly cut costs.

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