CBS Rides Distribution Growth To Strong Q4 Showing Amid Viacom Merger Talks

Les Moonves

CBS reported an 11% rise in revenue and an 8% gain in adjusted operating earnings in the fourth quarter ending December 31, citing strength in content licensing and distribution revenues, plus demand from skinny-bundle OTT providers.

Revenues set a record, hitting $3.92 billion from $3.52 billion for the fourth quarter of 2016. On an adjusted basis, operating earnings per share reached $1.20, ahead of Wall Street’s consensus forecast of $1.14. Net profits, however, were hit by a one-time charge of $129 million related to the U.S. tax law, which took effect in December. Counting that charge, net profits dropped 85% from the prior-year quarter, to 10 cents a share from 63.

Content licensing and distribution revenues grew 33% and affiliate and subscription fee revenues were up 20%. Leading this surge was 31% growth in retransmission revenues and fees from CBS network affiliate stations as well as digital areas such as the SVOD service CBS All Access.

CBS and former corporate sibling Viacom recently announced they have each formed committees to formally explore the possibility of recombining, a scenario they explored and then abandoned in 2016.

One blemish in the quarter was advertising revenue, which decreased 3% due to comparisons with record levels of political advertising in the fourth quarter of 2016.

The company’s entertainment unit, which includes the CBS network, plus the studio and distribution arms, CBS Interactive and CBS Films, saw revenue shoot up 18% to $2.82 billion. Sparking the increase was 38% growth in content licensing and distribution revenues, driven by strong growth in both domestic and international licensing sales. Affiliate and subscription fees also contributed to the revenue increase and were up 40%, led by higher station affiliation fees and growth from digital initiatives, including CBS All Access and third-party live TV streaming offerings.

Entertainment operating income of $465 million increased 25% from $371 million for the same prior-year period.

In closing the books on 2017, the company offered an optimistic outlook for 2018.

“We expect 2018 to be another strong year,” chairman and CEO Leslie Moonves said in the official earnings release. “We feel very good about the growth path before us, and we continue to have great confidence in our ability to deliver for our shareholders.”

CBS shares, which came into the day well below their 52-week high of $70.10, closed at $56.78, up nearly 2% for the session.

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