Wall Street not surprised by CBS


Wall Street traders and analysts greeted the increased dividend and stock buyback announcement by CBS with a big yawn. It had little effect on the company’s stock price. "We are not surprised by this announcement as CBS continues to return 2.8 billion of cash on hand (as of June 30th) to its shareholders.  We continue to like CBS as a solid core holding and look for it to make additional increases to its dividend until it reaches its 50% payout ratio, which we anticipate sometime in 2009," wrote Wachovia analysts Timothy Schlock and Marci Ryvicker in a quick note to clients.

Bear Stearns analyst Victor Miller quips that the CBS letters stand for Cash Back to Shareholders. At the current share price, he figures CBS will be buying back about 7% of its outstanding stock under the new buyback authorization. Miller maintains his "Outperform" rating on the stock.
At Lehman Brothers, Anthony DiClemente downgraded the stock from "1-Overweight" to "2-Equal Weight," saying "we believe there are fewer visible catalysts for CBS shares in the next 6-12 months." He added that "local media concerns and broadcast TV ratings trends may also support a more tempered view given fair intrinsic valuation relative to growth."

Bank of America analyst Jonathan Jacoby remains neutral on the stock. "We believe that today’s capital return announcement might be the last one for a while. Post the announced 1.6 billion buyback, leverage will be approximately two times. In our view, this would appear to be at CBS’ comfort leverage range, and we would not expect CBS to take leverage significantly above this range.  Furthermore, we believe that going much higher might impact management’s strategy to keep some ‘dry powder’ for future acquisitions," Jacoby told clients.