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CBS Q1 Earnings Beat Estimates, Non-Ad Revenues Grow Y/Y
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CBS Corporation delivered first-quarter 2018 adjusted earnings of $1.34 per share that beat the Zacks Consensus Estimate by 15 cents and jumped 28.8% from the year-ago quarter.
Revenues increased 12.5% from the year-ago quarter to $3.76 billion and comfortably surpassed the consensus mark of $3.63 billion.
Strong growth was driven by strong advertising (46.1% of revenues), content licensing & distribution (26.5% of revenues) and affiliate and subscription fee revenues (26% of revenues).
Revenues by Type
Advertising revenues (46.1%) increased 8% from the year-ago quarter to $1.73 billion. Growth was driven by Network Ten in Australia as well as a solid performance at the CBS Television Network.
Non-advertising revenues (53.9%) jumped 16.6% in the reported quarter.
Content licensing & distribution revenues were up 17.8% to $995 million. Higher contribution from the international licensing of new series as well as the start of renewal periods for licenses of library programming drove year-over-year growth.
Further, affiliate and subscription fee revenues of $979 million grew 16.3% year over year on the back of 25% higher retransmission revenues and fees from CBS Television Network affiliated stations. Revenues from skinny bundles and CBS’ direct-to-consumer services nearly doubled in the quarter.
Segment Details
Entertainment revenues (72.2% of revenues) increased 15.7% to $2.72 billion driven by higher affiliate and subscription fee revenues (surged 39%), content licensing and distribution revenues (up 16%) and advertising revenues (up 11%).
CBS Network advertising revenues inched up 1% from the year-ago quarter. The company launched CBS Sports HQ and expanded CBS All Access into Canada.
Cable Networks’ revenues (16.2% of revenues) were up 12.2% to $609 million primarily due to growth of the Showtime subscription streaming service and the start of the renewal period for the licensing of Showtime original series.
CBS added one million more subscribers driven by increase in both traditional and direct-to-consumer distribution platforms. Management stated that CBS have added more than 100 hours of Showtime original programming, including the four hit series that premiered in the reported quarter.
Publishing revenues (4.3% of revenues) of $160 million dipped 0.6% year over year. Bestselling titles were I’ve Got My Eyes On You by Mary Higgins Clark and The Last Black Unicorn by Tiffany Haddish. Digital audio surged 43% in the first quarter.
Local Media revenues (11% of revenues) climbed 1.5% to $415 million primarily due to higher retransmission revenues. At CBS’s top 10 markets, revenues were up 4%.
Operating Details
In the first quarter, operating income increased 7.6% from the year-ago quarter to $781 million. Operating margin contracted 100 basis points (bps) to 20.8% reflecting higher investment in programming and digital initiatives.
Segment wise, Entertainment operating income jumped 22.1% year over year to $492 million primarily driven by higher revenues. Publishing increased 6.7% to $16 million due to favorable revenue mix that reduced operating expenses.
However, Cable Networks and Local Media operating income declined 8% and 6.7% to $230 million and $118 million, respectively.
Cable Networks operating income declined due to higher investment in programming, including the launch of two new hit series, The Chi and Our Cartoon President, on Showtime in the reported quarter.
Local Media profitability was negatively impacted by unfavorable revenue mix.
Balance Sheet & Cash Flow Details
As of Mar 31, 2018, cash and cash equivalents were $147 million as compared with $285 million as of Dec 31, 2017. Long-term debt was $9.47 billion down from $9.46 billion at the end of previous quarter.
Cash flow from operating activities was $717 million, while free cash flow was $687 million.
In the quarter under review, CBS bought back 3.8 million shares for $200 million. The company had $2.9 billion remaining under its current repurchase program.
Guidance
For the second quarter, CBS expects Local Media revenues increase at low to mid-single digits rate. Scatter pricing at the network remains extremely strong.
Advertising is expected to do well in the second-half of 2018, driven by midterm elections.
CBS reiterated revenue target of $2.5 billion for 2020.
Cable One is set to report first-quarter 2018 results on May 9. Tribune is set to report first-quarter 2018 results on May 10. E.W. Scripps is slated to report first-quarter 2018 results on May 7.
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CBS Q1 Earnings Beat Estimates, Non-Ad Revenues Grow Y/Y
CBS Corporation delivered first-quarter 2018 adjusted earnings of $1.34 per share that beat the Zacks Consensus Estimate by 15 cents and jumped 28.8% from the year-ago quarter.
Revenues increased 12.5% from the year-ago quarter to $3.76 billion and comfortably surpassed the consensus mark of $3.63 billion.
Strong growth was driven by strong advertising (46.1% of revenues), content licensing & distribution (26.5% of revenues) and affiliate and subscription fee revenues (26% of revenues).
Revenues by Type
Advertising revenues (46.1%) increased 8% from the year-ago quarter to $1.73 billion. Growth was driven by Network Ten in Australia as well as a solid performance at the CBS Television Network.
Non-advertising revenues (53.9%) jumped 16.6% in the reported quarter.
CBS Corporation Price, Consensus and EPS Surprise
CBS Corporation Price, Consensus and EPS Surprise | CBS Corporation Quote
Content licensing & distribution revenues were up 17.8% to $995 million. Higher contribution from the international licensing of new series as well as the start of renewal periods for licenses of library programming drove year-over-year growth.
Further, affiliate and subscription fee revenues of $979 million grew 16.3% year over year on the back of 25% higher retransmission revenues and fees from CBS Television Network affiliated stations. Revenues from skinny bundles and CBS’ direct-to-consumer services nearly doubled in the quarter.
Segment Details
Entertainment revenues (72.2% of revenues) increased 15.7% to $2.72 billion driven by higher affiliate and subscription fee revenues (surged 39%), content licensing and distribution revenues (up 16%) and advertising revenues (up 11%).
CBS Network advertising revenues inched up 1% from the year-ago quarter. The company launched CBS Sports HQ and expanded CBS All Access into Canada.
CBS Corporation Revenue (TTM)
CBS Corporation Revenue (TTM) | CBS Corporation Quote
Cable Networks’ revenues (16.2% of revenues) were up 12.2% to $609 million primarily due to growth of the Showtime subscription streaming service and the start of the renewal period for the licensing of Showtime original series.
CBS added one million more subscribers driven by increase in both traditional and direct-to-consumer distribution platforms. Management stated that CBS have added more than 100 hours of Showtime original programming, including the four hit series that premiered in the reported quarter.
Publishing revenues (4.3% of revenues) of $160 million dipped 0.6% year over year. Bestselling titles were I’ve Got My Eyes On You by Mary Higgins Clark and The Last Black Unicorn by Tiffany Haddish. Digital audio surged 43% in the first quarter.
Local Media revenues (11% of revenues) climbed 1.5% to $415 million primarily due to higher retransmission revenues. At CBS’s top 10 markets, revenues were up 4%.
Operating Details
In the first quarter, operating income increased 7.6% from the year-ago quarter to $781 million. Operating margin contracted 100 basis points (bps) to 20.8% reflecting higher investment in programming and digital initiatives.
Segment wise, Entertainment operating income jumped 22.1% year over year to $492 million primarily driven by higher revenues. Publishing increased 6.7% to $16 million due to favorable revenue mix that reduced operating expenses.
However, Cable Networks and Local Media operating income declined 8% and 6.7% to $230 million and $118 million, respectively.
Cable Networks operating income declined due to higher investment in programming, including the launch of two new hit series, The Chi and Our Cartoon President, on Showtime in the reported quarter.
Local Media profitability was negatively impacted by unfavorable revenue mix.
Balance Sheet & Cash Flow Details
As of Mar 31, 2018, cash and cash equivalents were $147 million as compared with $285 million as of Dec 31, 2017. Long-term debt was $9.47 billion down from $9.46 billion at the end of previous quarter.
Cash flow from operating activities was $717 million, while free cash flow was $687 million.
In the quarter under review, CBS bought back 3.8 million shares for $200 million. The company had $2.9 billion remaining under its current repurchase program.
Guidance
For the second quarter, CBS expects Local Media revenues increase at low to mid-single digits rate. Scatter pricing at the network remains extremely strong.
Advertising is expected to do well in the second-half of 2018, driven by midterm elections.
CBS reiterated revenue target of $2.5 billion for 2020.
Zacks Rank & Stocks to Consider
Currently, CBS carries a Zacks Rank #3 (Hold).
Cable One (CABO - Free Report) , Tribune Media and The E.W. Scripps Company (SSP - Free Report) are stocks worth considering in the broader Consumer Discretionary sector. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cable One is set to report first-quarter 2018 results on May 9. Tribune is set to report first-quarter 2018 results on May 10. E.W. Scripps is slated to report first-quarter 2018 results on May 7.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>