We recently downgraded our recommendation on CBS Corporation (CBS) to Neutral from Outperform with a target price of $15.00.
Due to its exposure to publishing, radio and television broadcasting, and outdoor billboard businesses CBS Corporation remains highly susceptible to the advertising market. The company experienced revenue declines across television, radio, outdoor and publishing businesses in the most recent quarter.
However, the company has been aggressively selling slower-growth radio stations in mid-sized markets to focus on the large markets that promise faster growth. As the company divests non-core assets, it is leveraging its strong balance sheet to deploy cash in higher growth interactive businesses.
Longer term, we think CBS’s divestitures will strengthen operations as it rationalizes its portfolio with better margin and higher growth businesses. Moreover, in order to protect its shrunken revenue base the company has lowered headcount, slashed dividend, and trimmed capital expenditures.
Recently, the company also realigned its reporting segments. CBS now reports under two groups — Content Group comprising — Entertainment (CBS Television Network, CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Films and CBS Interactive), Cable Networks (Showtime Networks and CBS College Sports Network), Publishing (Simon & Schuster) — and another Local Group comprising — Local Broadcasting (CBS Television Stations and CBS Radio) and Outdoor (CBS Outdoor).
Read the full analyst report on “CBS”
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