Davidson Kempner Drops CBS Corporation from Its 4Q14 Portfolio



Davidson Kempner sells its holdings in CBS

As per the recent 13F filing from Davidson Kempner, the fund sold its entire holdings in CBS (CBS).

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An overview of CBS

CBS (CBS) is a mass media company that operates in the following four segments:

  • The Entertainment segment consists of the CBS Television Network, CBS Television Studios, CBS Global Distribution Group, CBS Interactive, and CBS Films. The CBS Television Network is the most-watched network in the United States with two million viewers per week.
  • The Cable Networks segment consists of Showtime Networks.
  • The Publishing segment consists of Simon & Schuster, which publishes and distributes consumer books.
  • The Local Broadcasting segment consists of CBS Television Stations.

For the year ended December 31, 2014, the Entertainment segment accounted for 60% of CBS Corporation’s total revenue. The Cable Networks and Local Broadcasting segments accounted for 16% and 20% of total revenue, respectively.

CBS generated 13% of its revenue from international operations. Europe contributed 52% to its total international revenue.

In April 2014, the former CBS subsidiary Outfront Media (OUT) completed its initial public offering to form a real estate investment trust.

You can gain exposure to CBS with the Consumer Discretionary Select Sector SPDR Fund (XLY) and the SPDR S&P 500 ETF (SPY). CBS accounts for 1.21% of XLY and 0.15% of SPY. XLY has the highest weight in CBS’s peer The Walt Disney Company (DIS). DIS accounts for 7.09% of XLY.

Fourth quarter revenue growth

During the fourth quarter of 2014, CBS’s revenues increased 3% to $3.7 billion, primarily due to a 4% increase in advertising revenue. Spending for Thursday Night Football and political advertising at local stations was up 2%. Affiliate and subscription fees grew 11%. Content licensing and distribution was down 3%. EPS (earnings per share) saw growth for the 20th consecutive quarter with an increase of 8% to $0.77.

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Full-year 2014 results

In 2014, CBS revenues decreased 1.4% to $13.8 billion. EPS was at an all-time high with an increase of 6% to $2.96.

Commitment to shareholders

During the fourth quarter, CBS repurchased $800 million in shares, twice as much as the company repurchased during the prior quarter. CBS still has $4.8 billion of share repurchases in its current authorized program.

The company issued $1.2 billion in senior notes. CBS plans to use most of the proceeds to repurchase $1 billion in shares during 1Q15. On January 30, CBS declared a quarterly dividend of $0.15 per share.

New initiatives

CBS’s (CBS) digital distribution services are building young audiences. In 2014, CBS launched five new popular shows that the company owns. Recently, CBS started licensing the domestic screening rights for its current non-serialized hit shows such as CSI.

For the first time, CBS signed a deal outside the United States. The company entered into a long-term agreement with Bell Media in Canada. Bell Media will introduce Showtime as a stand-alone service provider.

The next article in the series will look at Davidson Kempner’s massive increase of its holdings in Time Warner (TWX).


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