Analyst upgrades CBS, but still bearish overall

AP News
Posted: Dec 08, 2009 1:01 PM

An analyst raised his rating on CBS Corp. Tuesday, citing the broadcaster's recent ratings sweep, but he stopped short of telling investors to buy the stock because of deeper, long-term issues at the company's TV and radio businesses.

Caris & Co. analyst David Miller upped his rating on CBS to "below average" from "sell."

He said CBS dominated ratings in the November sweeps _ a four-week period occurring four times a year when viewership data is measured and which serve as the basis for local ad ratings in coming months.

CBS ranked first among six broadcast networks in total viewers in all four weeks of the November sweeps, which ran from Oct. 29 to Nov. 25. CBS also prevailed among viewers 25 to 54 years old and was second to Fox in the 18 to 49 age group.

With CBS' improved showing in November, the company will be able to charge higher rates for scatter ads in at least the first two quarters of 2010. Scatter ads are those that aren't part of a company's pre-planned advertising purchase, but more last-minute and less targeted.

As such, Miller raised his 2010 revenue forecast for CBS to $13.4 billion from $13.2 billion and earnings per share estimate to 83 cents from 79 cents.

He also raised his price target to $10.50 from $8, expecting a smaller decline in the stock now than previously. Shares of CBS were up 18 cents, or 1.3 percent, to $14.07 in afternoon trading.

While its global outdoor advertising business remains fundamentally "solid," Miller said the threat of terrorism in the London subway system could cause some advertisers to balk at signing long-term contracts.

CBS Radio is seeing greater advertising revenue declines than other radio stations, and TV ad revenue also remains in the doldrums.

Social Security Fails
John Stossel

CBS also has to deal with a succession issue to Chairman Sumner Redstone. The heir apparent has been his daughter, Shari, who's vice chairman, and a succession plan was detailed in an irrevocable trust.

But Miller said alleged corporate "meddling" by Shari Redstone, and personality conflicts have led the elder Sumner Redstone to ask his daughter to relinquish her right to the chairmanship in exchange for full control over the movie theater chain owned by National Amusements Inc. The father owns 80 percent of the company and the daughter 20 percent.

Shari Redstone hasn't agreed to the deal yet, and a resolution would be positive for CBS, the analyst said. But even if she does, it doesn't solve the problem of who would succeed Sumner Redstone.