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CBS Corp (CBS) Q4 Earnings: Affiliate Revenues Hold the Key

Zacks

CBS Corporation CBS is slated to report fourth-quarter 2017 results on Feb 15, after the closing bell.

In the previous quarter, the company reported earnings beat of 3.7%. The bottom line also surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average positive surprise of 5.6%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether CBS will be able to deliver a positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the fourth quarter is pegged at $1.15, reflecting a year-over-year increase of 3.6%. In the past 30 days, the consensus estimate has moved down by 2 cents.


Meanwhile, analysts polled by Zacks expect revenues of $3,714 million up from $3,518 million in the prior-year quarter. The current estimate reflects a sequential growth of 17.1%.

Factors Influencing This Quarter

From the above estimates, it is apparent that CBS’ top and bottom lines are expected to grow year over year. We believe the company is likely to gain from increasing demand for content, rise in retransmission rates, expansion of direct-to-consumer business, sturdy digital presence, upfront fees from traditional distribution partners and higher international content licensing fees. Also, with the launch of Showtime's streaming service; online news channel, CBSN; and over-the-top service, CBS All Access, the company has started generating incremental revenues.

CBS’s sustained focus on increasing subscription-based revenues is likely to drive long-term growth as well. In the fourth quarter, analysts surveyed by Zacks anticipate revenues from affiliate and subscription fees to increase by more than 15% year over year to $888 million. Furthermore, the company has an extensive library of premium content that it monetizes over multiple platforms.

Analysts surveyed by Zacks expect revenues from adverting to be $1,779 million, down 0.9% year over year. Meanwhile, CBS remains highly vulnerable to the advertising market as it derives a major portion of revenues from the sale of advertising on its broadcast and cable networks and television, syndicated programming and online properties. Additionally, broadcast TV is losing ground to the internet and digital media.

CBS Corporation Price, Consensus and EPS Surprise

What Does the Zacks Model Unveil?

Our proven model does not show that CBS is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CBS has an Earnings ESP of -0.61%. Although, the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Activision Blizzard, Inc. ATVI has an Earnings ESP of +2.24% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Discovery Communications, Inc. DISCA has an Earnings ESP of +6.13% and a Zacks Rank #3.

Scripps Networks Interactive, Inc. SNI has an Earnings ESP of + 0.35% and a Zacks Rank #3.

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