Bump Up in CBS’ Digital Publishing Revs, but Little Stock Upside

May 17th, 2011 by Trefis Team
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CBS
CBS

CBS (NYSE:CBS) recently released Q1 2011 earnings and based on continued improvement in margins and a better outlook for the advertising market, we have upgraded our price estimate for CBS stock to $27.49. CBS reported impressive growth in its publishing business, however, the value contribution of this business to CBS remains low. The company competes with other media conglomerates like Disney (NYSE:DIS), News Corp. (NASDAQ:NWS), Time Warner (NYSE:TWX) and Viacom (NYSE:VIA).

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Publishing Growth

Simon & Schuster (the publishing division of CBS) publishes books in print, audio and digital formats. The company’s publishing business demonstrated solid growth during the recent quarter.

In terms of quality, as stated by CBS management, the company performed notably well. The management commented during its recent earnings announcement: [1]

Simon & Schuster had 61 New York Times bestsellers during the quarter and won this year’s general nonfiction Pulitzer for The Emperor of All Maladies. E-books are growing at a much more rapid pace now, which is good news for us due to the improved cost structure. [1]

From a financial perspective, digital sales growth seems to be skyrocketing. The company stated that the digital sales in Q1 2011 amounted to $28 million, representing a growth of 148% when compared to Q1 of 2010. [1]

But, as impressive as the performance may seem, publishing still remains a very small value contributor to CBS’ stock. We estimate that this figure stands a little under 3%. You can examine how accelerated growth in publishing revenues can impact CBS’ stock value by dragging the trend line in the interactive chart below.

Our price estimate for CBS’ stock stands at $27.49, roughly in line with market price.

See our complete analysis for CBS’ stock here

Notes:
  1. CBS’ Q1 2011 earnings transcript, SeekingAlpha [↩] [↩] [↩]