Diminished outlook for CBS


Wachovia analyst Marci Ryvicker warns that she expects CBS Corporation’s Q1 earnings report on Thursday to come in below the Wall Street consensus. She’s reduced her CBS estimates for the quarter and all of 2009.

“We had a chance to speak with various broadcast and network executives late last week. While there was no dispute that CBS is the strongest broadcast network going into the upfront, there were many cautious comments regarding: i) total upfront dollars, which are expected to be down double digits, ii) the national advertising environment, which was characterized as ”atrocious” and iii) overall network costs, which may be higher than what we and the Street expect,” Ryvicker said in a note to clients.

The analyst is actually bullish about revenues (OK, “bullish” may be overstating it in the current advertising market) based on ratings trends for CBS, but she is concerned about rising costs at the network. After her talks, Ryvicker said she and other analysts have not appropriately factored in the “extremely difficult cost comparisons at the broadcast networks resulting from last year’s writers’ strike.”

“Given our discussions, we increased our network year-over-year cost assumption from a mid-single digit decline to a low single-digit increase.  As network rev and costs are the largest drivers of our CBS model, this change had a significant impact on our OIBDA and EPS estimates. While we were at it, we also decided to reduce publishing revenue, which went from roughly flat to down mid-single digits.  As a result of these changes, our Q1 revenue estimate is essentially unchanged at $3.3B, OIBDA declined by 32% to $278M and EPS declined by $0.13 to $0.00, in line with the Street low. Currently, consensus EPS is $0.10,” Ryvicker said.

None of that changed her revenue estimate for CBS Radio, where Ryvicker expects Q1 same station revenues to plunge 32%.