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We retain our neutral recommendation on CBS Corporation (CBS - Analyst Report), a diversified conglomerate, which has marked its presence virtually in every sphere of media and entertainment through its divisions, and remains focused on creating a favorable business environment.

Born out of parent company Viacom in 2005, CBS Corporation’s operating divisions comprises CBS Television Network, CBS Interactive, Showtime, CBS College Sports Networks, Local Television and Radio Stations, CBS Outdoor and Simon & Schuster (publishing).

CBS Corporation has been focusing on containing costs, building operating efficiencies and taking strategic measures, which together helped the company post better-than-expected third-quarter 2012 results. The company posted quarterly earnings of 65 cents a share that beat the Zacks Consensus Estimate of 60 cents, and surged 30% from the year-ago quarter.

Total revenue came in at $3,418 million, up 1.6% from the prior-year quarter, reflecting increased revenues from affiliate and subscription fee along with strong performance from content licensing and distribution. However, the reported revenue fell short of the Zacks Consensus Estimate of $3,503 million.

Due to its exposure in publishing, radio and television broadcasting, and outdoor billboard businesses, CBS remains highly susceptible to the advertising market. The deterioration in the economy of the major markets such as Los Angeles, New York or Chicago, where the company operates, may result in a fall in advertising demand, and in turn, in the company’s revenue generating capabilities.

Advertising revenue declined 3% to $1,931 million during the quarter. Moreover, the company’s international outdoor business is currently facing significant challenges due to lingering macroeconomic concerns, especially in Europe.

However, management remains optimistic and expects growth momentum to continue based on reverse compensation from affiliates, strong demand of its content and online video streaming and retransmission consent.

The company is striving to add diverse revenue streams to hedge against economic cycles. The retransmission, affiliate and online distribution fees have been non-advertising-driven revenue and will become a significant growth driver. CBS is eyeing at least $1 billion in retransmission and reverse compensation revenues by 2017.

The above analysis supports our unbiased view on the stock. CBS Corporation, which competes with News Corporation (NWSA - Analyst Report) and Walt Disney Company (DIS - Analyst Report), holds a Zacks #2 Rank that translates into a short-term ‘Buy’ rating, and well defines the company’s endeavors undertaken to keep afloat in an economy that is still grappling to regain its momentum.

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