Why We Updated Trefis Price Estimate For CBS?

CBS Corporation (NYSE: CBS) reported its Q1 results on May 3rd, 2016, posting sales of $3.8 billion and revenue growth of 10%.  A key takeaway is the strong revenue growth is likely to continue in the near to mid-term. Advertising revenue increased by 31% due to the broadcast of the Super Bowl, whereas affiliate and subscription fees rose 15% due to a nearly 42% increase in retransmission and reverse compensation. We think the firm will continue to benefit from the trends evident in the first quarter earnings and re-affirm our positive stance on its stock. We have revised our price estimate for CBS to $58.25, implying 3% premium to the market as of May 5th, 2016. There is meaningful growth potential for the company’s broadcasting network due to strong uptake of retransmission and reverse compensation fee in the U.S. Additionally, cable networks division can benefit from strong international expansion.

[1] CBS Plays Hardball as Affiliate Fees Pile Up, The Wall Street Journal, August 20,2014

[2] Why CBS Could Post Decent First Quarter Results, April 28,2016

[3] Spending on Political Ads Soars, and Cable TV Rakes In the Cash, The Fiscal Times, March 1,2016

[4]CBS (CBS) Earnings Report: Q1 2016 Conference Call Transcript, The Street, May 04,2016

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to the full Trefis analysis for CBS Corporation.