While advertising revenue for CBS (NYSE:CBS) fell by 15 percent in the first quarter, overseas sales revenue from its popular "CSI" crime drama helped the company enjoy a solid first quarter, as profits rose 14 percent. "Everyone Loves Raymond" was also a strong syndication performer for the company, with fees also generating significant income.
Sales for the quarter came in at $3.65 billion, beating most estimates, although still relatively flat. Net income increased to $244.3 million, or 36 cents a share.
"It shows CBS is holding its own despite the recessionary advertising environment in the U.S.," said Fred Moran, an analyst at the Stanford Group in Boca Raton, Florida. He recommends holding CBS shares. "The yearly dividend is now a 5 percent yield, and it's one of the cheapest stocks in the media group."
Another reason for the gain in profits was the writers' strike, which drastically reduced production costs over the 3-month period.
Advertising Revenue
As far as the drop in advertising revenue goes, much of the 15 percent decline in advertising was the result of the NCAA Men's Basketball Tournament being aired in the second quarter in 2008, rather than the first quarter like it did last year.
Another key element in the drop in advertising revenue was the divesting of stations and the three-month writers' strike.
CBS Radio
Overall revenue at CBS radio dropped 9 percent to $363.5 million, based on weak ad sales and selling off of almost 40 stations across 10 markets. For stations with CBS over a year, revenue slid by 6 percent.
Operating profit for radio plunged 27 percent, to finish at $115 million. The company projects that their outdoor-advertising business will pass radio as the No. 2 contributor to operating profit after TV for the company.
TV Results
Revenue for the television division increased by 1 percent to $2.6 billion for the quarter. That wasn't bad considering the majority of analysts thought revenue would drop by about 4 percent.
Profits from syndication helped the television unit enjoy a 15 percent increase, reaching $402.1 million.
CEO Leslie Moonves said advertising revenue for the existing quarter has increased in the double-digit range in comparison to the same quarter last year. He added that expectations are the fall TV season will also enjoy strong advance ad sales.
Outdoor Advertising
The outdoor-advertising division had a revenue increase of 7 percent to end the quarter at $497 million. Higher lease rates, transportation costs and depreciation expenses however, drove down operating profits by 6.2 percent to $44.1 million.
CBS made a significant deal last week when it bought International Outdoor Advertising for $110 million. That will add 17,000 new locations for the company in the South American countries of Brazil, Chile, Argentina and Uruguay.
Publishing Division
The publishing division fell sharply as it lost 32 percent from last year, which had enjoyed record sales. It failed to generate winners like the high-selling "The Secret" by Rhonda Byrne. Revenue reached $201.6 million.
Dividend Increase
Chief Financial Officer Fred Reynolds said CBS likes the option of turning cash over to investors in the form of dividends, and as a result increased it from 25 cents to 27 cents; an 8 percent move.
Shareholders of record as of June 3 will receive the dividend payout on July 1.
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