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CBS Beats Expectations on Ad Upside

CBS posted earnings two and a half times last year's earnings per share and 11 percent higher revenue — beating analyst expectations, on a combination of an ad recovery and operating efficiencies.

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CBS

Chief Executive Les Moonves stressed on the earnings call that results were "outstanding in every single business unit" and though the company is benefiting from a recovering economy, its results are not just a function of a rising tide. Moonves pointed to operating efficiencies and leading ratings at CBS .

CBS is a bellwether for the national advertising and today's numbers bode well for the rest of the media giants earnings' this week and next. Excluding one-time items CBS posted net income of 25 cents a share, four pennies higher than what analysts projected, and up from just 9 cents in the year ago period. The local ad market, which was hit particularly hard during the downturn has turned around with local broadcasting posting 17 percent revenue growth.

Perhaps most importantly, Moonves has an optimistic outlook for an ongoing ad recovery, saying the ad recovery should continue through next year, thanks to a boost from political ads. This year CBS led the way among the networks in total volume (selling 80 percent this year) and price increases during the Upfront ad sales period. Moonves expects pricing during the "scatter market" to remain strong on high ratings and tighter inventory.

CBS' 10-year retransmission deal with Comcast*, announced yesterday, sparked a slew of analyst questions on the conference call. CBS described it as "milestone" agreement that will put CBS well on its way to hitting its previously-stated goal of $250 million in retransmission revenue by 2012. Moonves also stressed that this agreement will allow CBS to monetize its content across Comcast's new media platforms.

Moonves declared "this is a great deal for both parties." But it's especially important for CBS to secure this consistent revenue stream — the lynchpin in reducing its reliance on advertising.

* Comcast is in the midst of acquiring CNBC's parent, NBC Universal, in a $30 billion deal pending final regulatory approval.

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