Led by stronger-than-expected results in its TV division, CBS Corp. on Tuesday beat Wall Street expectations and posted a 14% jump in net income for the quarter ended March 31.
The broadcasting company’s profit increased to $244.3 million, or 36 cents a share. The gain occurred despite flat revenue of $3.65 billion, a drop in television advertising sales and a plunge in the network’s prime-time ratings because of the writers strike.
Although analysts had expected results to be hampered by the labor strife, CBS said the ratings decline was more than offset by lower TV production costs and the sale of reruns for the shows “Everybody Loves Raymond” in the U.S. and “CSI: Crime Scene Investigation” abroad.
CBS Chief Executive Leslie Moonves, in a call with analysts, described the results as “very solid” and said the television, radio, billboard and publishing company would boost its quarterly dividend to 27 cents a share from 25 cents despite “challenging economic times.”
Wall Street had been monitoring CBS’ earnings because it is the first of several media companies to report results over this week and the next and is heavily reliant upon advertising. CBS derives about two-thirds of its revenue from ad sales, and a drop typically signals a slowing economy.
Television revenue inched up 1% to $2.6 billion, and operating income rose 15% to $402.1 million. An important factor in the quarterly results was CBS’ 85% increase in TV license fees, largely from the syndication sales of “Raymond” and “CSI.”
“This was an unusual quarter,” said Michael Nathanson, media analyst with Bernstein Research. “There was some unquantified benefit from the strike because of lower production costs. . . . But the question really is about sustainability. It’s unclear to us whether these results can be sustained, particularly given the large number of one-time results during this quarter,” such as the syndication sales.
Its premium pay cable TV channel, Showtime, also made gains. During the last year, Showtime has added 1.3 million subscribers, Moonves said, for a total of 15.5 million homes.
Other divisions did not fare as well.
First-quarter revenue for CBS Outdoor increased 7% to $497 million, but operating income slipped 6% to $44.1 million. At CBS Radio, revenue decreased 9% to $363.5 million and operating income skidded 27% to $115 million for the quarter. Revenue also fell 12% to $201.6 million at publisher Simon & Schuster, where operating income sank 32% to $14.6 million.
CBS, however, was buoyed by political spending at its TV stations, countering a decline in local market ad sales.
“There was some softness in the market other than political, which obviously covered a lot of the sins,” Moonves said.
Analysts were curious about how CBS plans to spend its $2.3 billion in cash in light of reports that it is expected to join the bidding for the Weather Channel, owned by Virginia-based Landmark Communications Inc.
Moonves sidestepped the question, saying “at the moment there are no plans to announce anything major, but we do look at everything.”