What Is CBS’s Fair Value?

CBS Corporation (NYSE: CBS) reported solid fiscal first-half results, as both its earnings per share and revenues came in ahead of market expectations. In the first six months of 2018, the company’s overall revenue increased 10% year-over-year (y-o-y) to $7.2 billion, primarily due to growth across divisions. These gains came largely from growth in affiliate and subscription fees, which grew 16% y-o-y to $2 billion, and programming revenues, which were up 12% y-o-y to $1.7 billion. In addition, CBS reported adjusted operating income of $1.5 billion (+4% y-o-y) and also posted adjusted earnings of $2.47, up 18% y-o-y. The earnings growth was driven by a lower effective income tax rate in 2018 compared with the prior year, as a result of the enactment of new federal tax legislation.

CBS’s stock price has fluctuated between $48 and $60 since the beginning of this year. The stock is slightly down year-to-date despite strong financial results, largely due to the legal issues involving Leslie Moonves and National Amusements. We have maintained our long-term price estimate for CBS at $61, which is slightly ahead of the current market price. We have created an interactive dashboard on what CBS is really worth, which details our key forecasts and estimates for the company. You can modify the interactive charts in this dashboard to gauge the impact that changes in key drivers for CBS can have on our price estimate.

Overview of Forecasts

Looking ahead in 2018, we expect CBS to generate around $14.6 billion in revenues and adjusted earnings of around $1.8 billion. Our revenue forecast represents year-on-year growth of nearly 3%. Of the total expected revenues in 2018, we forecast $9.5 billion in revenues for the Entertainment business, nearly $2.6 billion for the Cable Networks business, over $800 million for the Publishing business, and nearly $1.7 billion for the Local Media division. CBS expects to see strong gains in the second half of the year at the local business, with the midterm elections in the fall. The company also expects continued growth in content licensing, as it is planning to expand content development and distribution to a host of third-party distributors such as Apple, Netflix, and TBS. The company’s management also made news on the over-the-top front, projecting 16 million subscriptions from All Access and Showtime OTT through 2022.

Going forward, we expect CBS to see modest growth as it continues to be driven by growth in advertising, direct-to-consumer offerings, retransmission and reverse comps and international content licensing. Our valuation dashboard suggests that CBS’s valuation has a slight upside.

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own.