CBS Revenues Rose on Strong Network Advertising



CBS in fiscal 2015

In this series, we will discuss the earnings results of CBS (CBS) and Pandora Media (P). CBS announced its 4Q15 and fiscal 2015 results on February 11, 2016. The company posted revenues of $3.9 billion in 4Q15, up by 6% over 4Q14. The company’s revenues slightly exceeded consensus Wall Street revenue expectations of $3.8 billion.

CBS had an adjusted EPS (earnings per share) of $0.92 in fiscal 4Q15, a growth of 19% year-over-year. Now let’s take a look at the company’s revenue components in fiscal 4Q15 and 2015.

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Advertising revenues

In fiscal 2015, CBS had revenues of $13.9 billion, up by 1% from fiscal 2014. However, the company’s advertising revenues in fiscal 2015 declined by 3% as a result of lower local advertising revenues.

In fiscal 4Q15, the company’s advertising revenues were up by 1% over 4Q14, driven primarily by revenue growth of 8% in network advertising. As the chart above indicates, advertising was an important component at 51% of CBS’s total revenues of $13.9 billion in fiscal 2015.

CBS expects fiscal 2016 to “be a very good year for advertising” because of the broadcast of the Super Bowl and an increase in political advertising in 2016.

In comparison, the Walt Disney Company (DIS) had advertising revenues of $2.6 billion in fiscal 1Q16, a growth of 12% over 1Q15. Comcast’s (CMCSA) NBCUniversal Cable Networks segment had a marginal year-over-year decline in advertising revenues of 0.3% in 4Q15. Time Warner’s (TWX) Turner business segment saw a 2% rise in revenues in fiscal 2015 and a 5% rise in fiscal 4Q15, driven by growth in domestic advertising.

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Affiliate and subscription fees

In fiscal 4Q15 and 2015, CBS’s affiliate and subscription fees increased by 13% and 15%, respectively. The company expects revenues from retransmission fees and “reverse compensation” to be about $1 billion in fiscal 2016 and more than $2 billion by 2020.

In contrast, Comcast expects its retransmission consent fees to grow to $800 million in 2016, up from $535 million in fiscal 2015.

Content licensing and distribution

CBS’s revenues in fiscal 4Q15 were driven by a 16% growth in content licensing and distribution revenues. This growth was primarily fueled by a surge in demand for the company’s television content in international markets. CBS continues to expect increasing international demand for its content.

CBS has also stated that an increasing number of millennials are opting for its OTT (over-the-top) offerings including CBS All Access and CBS Showtime. CBS makes up 0.11% of the iShares S&P 500 Index (IVV). IVV has 3.9% exposure to the computer sector.


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