Merrill Lynch lowers CBS estimates


The latest research piece from Merrill Lynch analyst Jessica Reif Cohen declares that CBS Corporation is “going from bad to worse.” The analyst has lowered her financial estimates for CBS Corp. for both 2008 and 2009, along with dropping her target price by a buck.

CBS will report Q3 results on October 30. Reif Cohen projects that radio EBITDA will drop 20% and television 16%.

“We anticipate another difficult quarter for CBS, as it remains highly exposed to the deteriorating local advertising market,” the analyst told clients. On the top line she expects television revenues to decline only 1% to $2.05 billion for the quarter. CBS Network revenue is seen falling 2.5%, but at the local station group she estimates the decline will be around 15%. TV Distribution is a bright spot and Showtime “will remain solid.” For radio, revenues are projected to drop 10% to $388 million. But with high fixed costs for both divisions, her estimate is that TV EBITDA will drop 16% to $400 million and radio 20% to $136 million. CBS Outdoor is seen as doing better than the broadcast operations, with revenues up 4% and EBITDA 1%.

Including the recent acquisition of CNET, Reif Cohen is expecting earnings per share at CBS Corp. to be 35 cents – a nickel less than her previous estimate and below the Wall Street consensus of 43 cents. The analyst maintains her “underperform” rating on the stock. Her target price for CBS Corp. is now $17, a drop of a buck from her previous $18.