CBS's 3Q profit rises 53 percent on ad revival
SAN FRANCISCO — CBS Corp. pounced on an advertising revival in the broadcast media to produce a 53 percent increase in its third-quarter net income.
The results announced Thursday mark the third consecutive quarter of financial improvement at CBS, which owns the most watched TV network in the U.S. That followed a slump triggered by the worst recession since World War II. The downturn prompted CBS to slash its stock dividend by 81 percent to 5 cents per share early last year.
CBS executives predicted the momentum that has building through this year will extend into next year.
"CBS is firing on all cylinders," Chairman Sumner Redstone said in a conference call.
The company, based in New York, underscored its confidence by committing to spend $1.5 billion buying back its stock beginning in January.
At current stock prices, CBS would reduce the number of outstanding shares by about 13 percent. The reduction should help boost the company's earnings per share, a key factor in the equation that investors use to calculate how much a stock might be worth.
CBS shares, already up about 25 percent so far this year, gained 12 cents in Thursday's extended trading after finishing the regular session at $17.66, up 37 cents.
The company earned $317.3 million, or 46 cents per share, in the three months ending in September. That compares with income of $207.6 million, or 30 cents per share, a year ago.
If not for gains unrelated to its ongoing business, CBS said it would have earned 35 cents per share. On that basis, the earnings exceeded the average estimate of 31 cents per share among analyst surveyed by Thomson Reuters.
Revenue for the period totaled $3.3 billion, down from $3.35 billion a year ago. The decline is deceiving, though, because CBS reeled in extra revenue of about $300 million last year from selling the syndication rights to five TV series.
Like other broadcasters, CBS has been benefiting from political campaigns that spent more money than expected on ads to get out their messages leading up to this week's election. Companies also have been buying more ads to peddle their wares in recent months.
Those trends helped generate a 25 percent increase in ad revenue at the 28 TV stations that CBS owns and a 9 percent increase at the company's 130 radio stations. Overall ad revenue was up 10 percent from a year ago.
"The broadcast advertising marketplace remains strong both nationally and locally," CBS CEO Leslie Moonves said.
The owners of two other major TV networks, News Corp.'s Fox and General Electric Co.'s NBC, already have reported robust ad gains. Walt Disney Corp., the owner of ABC, is scheduled to release its quarterly results next week.
Google Inc., which runs the Internet's largest ad network, has been selling more advertising as the year progressed, too.
Ad revenue at newspapers, though, is still slipping, indicating that marketers are still being careful about how and where they spend their money.
And while nonpolitical advertisers had difficulty finding commercial time amid all the campaign ads and may still have money left to spend, it remains unclear whether broadcasters will be able to sustain their gains for long past the election season.
Joseph Ianniello, CBS's chief financial officer, tried to convince analysts that the recent turnaround in the company's fortunes won't be a short-lived phenomenon. "The overall ad market still has plenty of room to recover," he said in the conference call.
As part of its effort to become less dependent on ads, CBS has been ramping up its efforts to make more money off its cable networks, including Showtime. Cable revenue climbed 12 percent from last year to $370 million in the third quarter.
Like its industry peers, CBS also has been more aggressive about extracting fees from cable and satellite TV providers to carry the signal of its broadcast network.