CBS beats expectations; raises dividend


Instead of the decline that Wall Street had expected, CBS Corporation delivered Q1 revenues that were essentially flat, with double digit gains in operating income and earnings per share. And the company announced yet another dividend increase – an additional two cents to 27 cents per quarter. CEO Les Moonves was a happy guy in his quarterly conference call – and he got a strong endorsement from Chairman Sumner Redstone. Radio was again a soft point, with same station revenues down 6%, but Moonves said CBS Radio is beginning to monetize its ratings gains. TV revenues were up 1%, despite the lack of the Super Bowl this year.

For the company’s segments, TV revenues grew 1% to $2.6 billion and operating income before depreciation and amortization (OIBDA) jumped 13% to $449.5 million. A big chunk of that gain came from syndication sales gains, including the new international self-distribution arrangement for the CSI franchise. TV ad revenues were down 15%, but that was blamed in part on the lack of the Super Bowl, timing differences for other sports events and the impact of the WGA writers strike. Moonves told analysts that audiences returned to pre-strike levels for most CBS shows as new episodes began to air, rather than reruns, and he noted that scatter pricing remains up double digits from last year’s Upfront. As for the coming Upfront, Moonves says CBS will be giving advertisers a look at new shows coming this fall, but “presentations” rather than full pilots. He said shooting those reduced versions, with key scenes to show the interplay between major characters, cost about half as much as full pilots and gave network executives plenty to judge potential new shows by. He is predicting a “healthy” Upfront.

CBS Radio revenues were down 9% to $363.5 million, although that was a 6% drop on a same station basis. OIBDA dropped 26% to $122.3 million. Moonves said the radio division is beginning to monetize ratings gains from format changes instituted by CBS Radio CEO Dan Mason. Moonves also noted that Mason is heading out on an advertiser road show, beginning in Los Angeles, to pitch the value of the company’s radio stations to advertisers. CBS Corp. CFO Fred Reynolds noted that 60 of the CBS Radio stations, primarily in the largest markets, posted top line growth in April and that momentum has extended into May.

CBS Outdoor revenues rose 7% to $496.9 million and OIBDA 1% to $101.5 million. Publishing revenues dropped 12% to $201.6 million and OIBDA fell 28% to $17.1 million.

Total company revenues were flat at $3.65 billion, but adjusted OIBDA, excluding stock-based compensation and restructuring charges, jumped 10% to $720 million. Earnings per share jumped 23% to 43 cents per share, due in part to the company having fewer shares outstanding after significant buybacks.

Even with the dividend increase, CBS Corp. still has plenty of cash for acquisitions. So, what is Moonves interested in buying? He said the company doesn’t have to buy anything to continue growing, but if good opportunities are available he is interested in acquiring content, interactive and outdoor assets.

Clearly looking to refute rumors of a battle between Moonves and Viacom CEO Philippe Dauman, Sumner Redstone, who is Chairman and controlling shareholder of both companies, opened the CBS conference call by giving Moonves a strong statement of support. “I want to make one thing clear – there is no one, no one, that I’d rather have at the CBS helm than Les Moonves,” Redstone proclaimed. He jumped back in during Q&A to insist that he supports both CEOs and wants the two companies to compete, as Viacom is about to do with a new VOD network after CBS refused to meet its demands for renewing a movie deal for Showtime. Redstone said Moonves’ Showtime strategy will work for CBS and Dauman’s strategy will work for Viacom.

RBR/TVBR observation: Sumner Redstone could turn on Moonves in an instant. After all, he was a big backer of Tom Freston at Viacom until he forced Freston out. But CBS continues to hit on virtually all cylinders, with the sputter from CBS Radio showing signs of correction. If there is any secret plot by Philippe Dauman to undermine Moonves and seize control of the entire Redstone empire, CBS and Viacom, Moonves isn’t screwing up and giving him any opening.