CBS Executes Well

Overall revenue grew 11% (excluding the spun-out radio segment) year over year to $3.9 billion. Ad revenue fell by 3% due largely to the loss of political spending from last year. Affiliate and subscription fees for the entertainment segment grew 40% year over year driven by retrans and reverse comp growth along with growth in All Access subscriptions and third-party live streaming. CBS will have all of its retrans and reverse comp deals up for renewal over the next three years, providing the firm with the ability to meet its stated 2020 revenue goal of $2.5 billion for this revenue source. Content licensing and distribution grew by 33% as the firm benefited from the first-run syndication of its two third-year shows, NCIS New Orleans and Madam Secretary, highlighting the return from the continued investment in the studio business. Adjusted operating margin fell to 21% versus 22% a year ago as revenue growth in high-margin areas such as retrans and reverse comp were more than offset by increased content costs.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.