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CBS Posts Rare Drop in Ad Sales, Shares Hit 13-Month Low

CBS' 'Star Trek: Discovery'

CBS Corp. (CBS) has erased any and all gains made over the past 13 months.

Shares in the broadcast giant were falling in after-market trading Thursday, Nov. 2, after the owner of the most-watched network reported a rare quarter in which revenue trailed analyst forecasts. CBS shares had lost 14.4% this year through Thursday's close at $54.46. Shares were down 2% after hours to $53.40.

Revenue of $3.17 billion for the third quarter missed expectations of $3.26 billion, the average of Wall Street analysts surveyed by Bloomberg. Digging into the top-line number, advertising sales for the third quarter declined 5% compared with the same period a year ago, driven largely -- thought not exclusively -- by lower political spending.

CBS is now trading at a level last touched in late September 2016. That was before Donald Trump was elected president but one month into a dark and foreboding trend: declining audiences for National Football League games. Revenue at CBS's entertainment group, its largest, was $1.82 billion, trailing expectations of $1.99 billion.

As usual, CBS succeeded in extracting more money out of pay-TV operators, i.e. retransmission fees, as well as TV stations affiliated with the network. Those fees grew 27% during the quarter though content licensing, while distribution revenue fell 22%.

CBS' earnings are a chance for investors to get a sense of the state of television advertising. While retransmission fees account for more than half of CBS's revenue, advertising still accounts for 40% of sales, making CBS the most exposed to ad sales of any large-cap media stock. Chairman and CEO Leslie Moonves said technological advances are opening up new ways of selling advertising based on digital consumer data and delayed viewing.