CBS Updates: Top Ratings Lift Stock, NFL Fees Manageable

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CBS
CBS

Source: Yahoo Finance

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CBS’ (NYSE:CBS) stock has picked up around 10% in the last couple of weeks on a string of good news concerning TV ratings. The company has long emphasized on the importance of the content, which is ultimately necessary and pivotal for striking re-transmission and licensing deals. The recent results indicate that CBS is sticking to its philosophy and has fared better than its rivals such as Comcast’s (NASDAQ:CMCSA) NBC and News Corp’s (NASDAQ:NWS) Fox.

See our full analysis for CBS

Two and a Half Men, which faced an uncertain future with the Charlie Sheen fiasco has returned as the highest ratings gainer of the new fall season. [1] It generates more than $150 million in ad revenue for CBS in one season, according to Kantar Media.  ((ref:1)) In addition to the above, CBS won Thursday night and Tuesday night ratings with its hit shows such as The Big Bang Theory, Rules of Engagement and others.

In another significant development, the company announced that it is likely that it will be paying a significantly higher amount for broadcasting NFL (National Football League) games when it renews its contract. [2] It is likely that the NFL will hike its take by around 60% and will be applicable from 2013 when the current contract expires. [3] We expect the company to pass on this cost to customers, and avoid taking hit on the profits.

Our price estimate of $33.52 for CBS, implies a premium of almost 40% to the market price.

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Notes:
  1. CBS: ‘Two and a Half Men’ Ratings Surge Validates Decision to Bring Show Back, Reuters, Dec 6 2011 []
  2. CBS’s Moonves Sees Higher Cost for NFL Games in Rights Renewal, Bloomberg, Dec 7 2011 []
  3. ref:3 []