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Factors Setting the Tone for CBS Corp (CBS) in Q3 Earnings

CBS Corporation CBS is slated to report third-quarter 2017 results on Nov 2, after the closing bell. In the previous quarter, the company reported earnings beat of 7.2%. Notably, it has surpassed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 6.4%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether CBS will be able to post positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is $1.10, reflecting a year-over-year increase of nearly 5% and approximately 6% sequentially. We note that the Zacks Consensus Estimate has decreased by a penny in the past seven days.

Meanwhile, analysts polled by Zacks expect revenues of $3,295 million down from $3,396 million reported in the prior-year quarter. However, the consensus estimate portrays a sequential growth of 1.2%.

Factors Influencing this Quarter

From the above discussion, it is apparent that CBS top-line is expected to decline 3% year over year in the third quarter. We believe that this might be due to fall in revenues from advertising sales and content group.

Analysts surveyed by Zacks expect revenues from adverting to be $1,123 million, down 23.6% year-over-year. CBS remains highly vulnerable to the advertising market, as it derives a major portion of revenues from the sale of advertising on its broadcast and cable networks and television, syndicated programming, and online properties. Notably, broadcast TV is losing ground to the internet and digital media. Consequently, analysts remain concerned about the company’s broadcast TV performance, which is a major revenue and profit contributor.

Nevertheless, CBS’s sustained focus on increasing subscription-based revenues is likely to drive long-term growth. In the third quarter, analyst surveyed by Zacks expects revenues from affiliate and subscription fees to increase by more than 27% year over year. Further, the company has an extensive library of premium content that it monetizes over multiple platforms. CBS crossed $1 billion mark in revenues from retransmission consent and reverse compensation in 2016, a year earlier than anticipated. In 2017, management expects retransmission and reverse compensation to increase 25% from the prior year.

CBS Corporation Price, Consensus and EPS Surprise


CBS Corporation Price, Consensus and EPS Surprise | CBS Corporation Quote

What Does the Zacks Model Says?

Our proven model does not conclusively show that CBS is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CBS carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -2.12%, consequently making the surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Activision Blizzard, Inc. ATVI has an Earnings ESP of +4.32% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Discovery Communications, Inc. DISCA has an Earnings ESP of +0.46% and a Zacks Rank #3.

Scripps Networks Interactive, Inc. SNI has an Earnings ESP of + 5.10% and a Zacks Rank #3.

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CBS Corporation (CBS): Free Stock Analysis Report
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