Q1 results were well ahead of expectations, so Wall Street analysts are reworking their estimates for CBS Corporation. A couple of them have already boosted their revenue and earnings estimates for the rest of this year.
At Wells Fargo Securities analyst Marci Ryvicker noted that operating income before depreciation and amortization (OIBDA) of $576 million was well ahead of The Street consensus of $473 million and earnings per share (EPS) of 29 cents significantly beat the consensus of 19 cents.
“We would say the biggest upside surprises were in entertainment and local broadcast – each of which were ahead of our estimates by 33% and 28%, respectively (and we remind you that the Netflix deal does not kick in until April). Momentum continues in Q2 with pacings strong in local, and scatter priced at 40% above the current upfront, which (to us) means CBS should see double digit CPM growth in this next round of negotiations (CBS’ upfront presentation is May 18th). On top of exceptional results, CBS doubled its annual dividend to $0.40 from $0.20, representing a 1.6% yield,” Ryvicker said in a note to clients. “We raised our OIBDA estimates for both 2011 and 2012 – our EPS estimates are mixed. For 2011, we raise EPS to $1.71 from $1.62. For 2012, we actually go down to $2.07 from $2.14 (Consensus is at $1.97) – the primary reason for the change is D&A, which we had modeled incorrectly. We continue to like this stock and raise our valuation range to $32-34 from $27-29, which represents a target multiple of ~8x – versus the current 2012 estimated multiple of 6.3x.”
“CBS is indeed on a roll, printing 1Q results which came in substantially ahead of our expectations as well as the Street’s,” said Barclays Capital analyst Anthony DiClemente. “On the call, CFO Joe Ianniello highlighted the sustainability of key initiatives which drove the upside to the quarter, including margin expansion and the inflow of incremental, high-margin dollars from retrans and reverse comp, as well as broadband distribution deals for its vast library of hit programming. Factoring in the 1Q beat and our more bullish expectations, we are raising our 2011 EPS estimate to $1.73 from $1.52, and our 2012 EPS estimate goes to $2.16 from $1.94. We are also taking up our price target to $30 from $25, which is now based on a 17.3x multiple on ’11 EPS of $1.73,” the analyst wrote.
RBR-TVBR observation: Investors started running like bulls for CBS, even as the overall market fell on Wednesday. At the opening bell the widely traded CBS Class B stock was at $26.32, up from Tuesday’s close of $25.24 before the Q1 results and dividend hike were announced. The stock ended Wednesday’s session up 7.8% at $27.21.