Analyst liked what he heard from CBS


Barclays Capital analyst Anthony DiClemente notes that CBS Corporation did not provide formal guidance for 2010 in its quarterly conference call. But the analyst liked what he heard about trends and modestly increased his estimates. As he put it in a note to clients: “No guidance, no worries.”

“CBS did not provide formal guidance for full year 2010, but used the conference call to provide detailed advertising pacing estimates, and incremental detail on the new reporting structure and the new sub-segments. Even without formal guidance, the advertising details provided suggested upside to our 2010 estimates and we have modestly taken up our revenue, OIBDA and EPS estimates as a result,” DiClemente wrote. He is looking for CBS Corp. to generate about $1.40 per share in free cash flow for 2010.

The television ad recovery continues, DiClemente stated, with total TV advertising (network and stations combined) up roughly 5% year-over-year in Q4, as the analyst did his own math from the new CBS reporting of local and network separately. The O&O group was down 3% and the network up 8%, both an improvement over Q3.

“This upward trajectory is likely to continue give the advertising pacing commentary provided by management on the call. The TV station group is currently pacing up in the high-teens range, with the 14 [CBS] O&O stations pacing up roughly 30%. The network is posting scatter pricing up roughly 30% vs. last year’s upfront in 1Q10. This scatter number also contains the Super Bowl, so it is somewhat inflated,” the analyst wrote in a research note.

Syndication faces some headwinds, however, since 2009 benefitted from the first cycle syndication sales of “Medium,” “Criminal Minds,” “Ghost Whisperer,” “Everybody Hates Chris,” and “Numb3rs,” which DiClemente calculated over $200 million in year-over-year improvement.  “It is clear 2010 will not see the same level of syndication benefits,” he cautioned.

What about radio?  “Q4 Radio results of $322M (-12.1% Y/Y) in revenue were below our expectations for revenue of $360 million (-2.0% Y/Y) reflecting radio station divestures. On a same station basis, radio was down only 10% Y/Y – still below our expectations. Radio advertising pacings have been improving substantially over 4Q09 and moving into 1Q10, with December representing the best month of the year for the radio segment,” the analyst said. “Based on management commentary, we believe radio stations are pacing up mid-single digits in total, with stations in the top 10 markets posting low-teens increases. As we expect roughly 7% radio advertising revenue growth in Q1, this would represent the first quarter of growth since 3Q05 – prior to the CBS split from Viacom.”

But he has hope for CBS Radio. “We think margins in Radio stand to improve substantially as revenues increase from a potential advertising upswing and the significantly reduced cost base. We estimate roughly 15% Y/Y 2010 radio OIBDA growth driven by 29.2% 2010 margins – up
160 bps from 2009,” DiClemente told investors.

A recovery is also starting to take hold for CBS Outdoor. Q4 revenues were down 8.1%, which was better than the 14% decline that DiClemente had been expecting.

On the bottom line, the Barclays analyst is now expecting CBS Corporation to post earnings per share of 95 cents for 2010, up a dime from his previous forecast.