Bloomberg News

CBS Gains on Plans for Licensing Fees, Share Repurchases

February 15, 2013

CBS Corp. (CBS:US), owner of the most-watched U.S. television network, rose the most in almost a month after forecasting growth in licensing fees and an increase in its share buybacks.

CBS, based in New York, gained (CBS:US) 4 percent to $44.64 at the close in New York, the biggest gain since Jan. 17. The stock has risen 17 percent this year, outpacing the Standard & Poor’s 500 Index’s 6.6 percent climb.

The network is counting on revenue sources such as online streaming and retransmission fees from cable services to bolster slower growing broadcasting and publishing businesses. The company will get $500 million in cable and broadcast licensing fees this year, halfway toward its goal of $1 billion by 2017, Chief Financial Officer Joseph Ianniello said.

“We’re going to approach the halfway mark,” Ianniello said yesterday on a conference call with investors. “We’re well on our way.”

Revenue from pay-TV systems such as Comcast Corp. and Time Warner Cable Inc (TWC:US). that carry CBS programming more than doubled to $72 million in the period from $34 million a year earlier, Martin Pyykkonen, an analyst at Wedge Partners Corp., estimated in a report this week. CBS also receives a share of fees collected by affiliates stations.

The broadcaster added $1 billion to its budget for Class B stock repurchases this year, almost double what it had previously planned. CBS, controlled by Chairman Sumner Redstone, spent $1.17 billion on buybacks in 2012. At yesterday’s closing price, the broadcaster could have bought almost 4 percent of the stock with the additional $1 billion.

Looking Past

The repurchase plan and fee forecast helped investors look past fourth-quarter results that missed analysts’ estimates on a decline in online licensing fees.

Net income rose 6.2 percent to $393 million, or 60 cents a share, from $370 million, or 55 cents, a year earlier, CBS said yesterday in a statement. Excluding items, profit of 64 cents missed the 69-cent average of analysts’ estimates.

Sales increased 2.4 percent to $3.7 billion from $3.61 billion a year earlier, missing the $3.85 billion average of 25 analysts’ estimates compiled by Bloomberg.

The network will be renewing pay-TV agreements for about 20 percent of its television footprint this year, producing growth in affiliate and subscription revenue (CBS:US), led by retransmission fees, Ianniello said.

The drop in online revenue, after a surge sparked by a new contract a year earlier, underscores the short-term volatility of newer ventures even as the company predicts higher streaming revenue for all of 2013.

More Streaming

CBS is making more of its TV shows available for streaming on Internet services including Netflix Inc. (NFLX:US), Amazon.com Inc., Hulu LLC and others. A year ago, CBS began its initial streaming agreement with Netflix and Hulu Plus for CW programs.

CBS said on Feb. 11 it would provide episodes of “Under The Dome,” a show based on a Stephen King book, exclusively to Amazon four days after they are broadcast.

Operating profit at CBS’s entertainment division, which includes the broadcast network, climbed 19 percent to $280 million on sales that were unchanged at $1.99 billion.

Profit from local broadcasting, including CBS’s TV and radio stations, gained 22 percent to $295 million from a year earlier, an off-election cycle year. Sales totaled $787 million, rising 9.2 percent on record advertising during the 2012 political campaigns.

Outdoor Americas operating profit fell 19 percent to $52 million on sales that were virtually unchanged at $340 million. The Simon & Schuster publishing unit’s operating profit rose 8 percent to $27 million on sales of $215 million, down 6.1 percent. Results a year earlier benefited from the Steve Jobs biography.

Cable Profit

Operating profit at the cable networks, including Showtime, increased 4.1 percent to $176 million on sales of $438 million, up 11 percent.

The company announced plans in January to convert its outdoor advertising unit into a real estate investment trust and seek a buyer for the European and Asian parts of that business. The stock rose 9.7 percent last month.

The conversion could be finished in the 2014 tax year, CBS said at the time. The European and Asian businesses will be classified as discontinued operations as of Dec. 31, 2012.

“We’ve had considerable interest in our outdoor business in Europe and Asia,” Ianniello said.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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Companies Mentioned

  • CBS
    (CBS Corp)
    • $55.86 USD
    • -0.64
    • -1.15%
  • TWC
    (Time Warner Cable Inc)
    • $152.78 USD
    • -0.73
    • -0.48%
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