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CBS profit beats Street, even as advertising hurts

CBS Corp reported stronger-than-expected quarterly earnings on Thursday, as its television business received a boost from the syndication of hit shows like “Criminal Minds” and “Medium.”

Revenue from the sale of those shows helped mask what remains a bigger problem for CBS and the rest of the media industry: a year-long slump in advertising that is only starting to ease.

CBS typically banks about 65% of its sales from advertising - more than its rivals - and in the third quarter that meant revenue dropped significantly in its radio, outdoor advertising and digital businesses.

Only its TV business, where CBS is the top rated network, and its publishing business, Simon & Schuster, reported higher revenue in the quarter.

Overall, revenue fell about 1% to $3.35 billion. Still that surpassed analyst estimates of $3.19 billion. Adjusted earnings of 25 cents a share also beat the 22 cents a share analysts had expected, according to Thomson Reuters I/B/E/S.

Its reliance on advertising, however, should mean CBS has the most to gain once marketers start spending to promote their brands on TV, radio or billboards. At least that is the predominant view on Wall Street - one that has driven CBS shares 65% higher in the last six months. They were up 7.5% Thursday ahead of the earnings report.

Chief Executive Les Moonves, in a conference call, said he currently saw better trends in advertising, with spending from categories including auto, retail, pharmaceuticals and entertainment recovering.

“We have been telling you that the second half of the year would be better than the first and today's results bear that out,” he said. He affirmed the company's full-year profit outlook.

At the CBS network, which had the most popular prime-time lineup of shows, advertisers are scrambling to buy last-minute commercial time, Moonves said. “There is a great deal of demand for our spots,” he told investors and analysts.

Overall, CBS reported net earnings of $207.6 million, or 30 cents a share, compared with a loss of $12.46 billion, or $18.58 a share, a year ago, when it wrote down billions of dollars of assets.

By division, TV revenue increased 9%, thanks partly to syndication, the term used when shows are sold for repeats to individual TV stations; radio revenue fell 19%; outdoor revenue fell 23%; digital revenue fell 15%; and publishing revenue rose 2%.

Next quarter, the company said it would restructure its reporting lines. It will keep five divisions, but they will be subdivided.

One will be known as the content group, and be made up of entertainment, cable, and publishing. The other will be called the local group, and will be made up of local broadcasting and outdoor, two businesses that are badly struggling at the moment. (Reuters)