If you are interested in investing in a media company, there is one out there that is doing the right things. CBS (NYSE: CBS) has developed a long term strategy on growing the large media conglomerate and is executing on the plan.
As a result, the stock is one to consider looking more deeply into to see if they meet your needs as an investor. Below are the details as to what CBS is doing to grow the company and how these moves are paying off now and will continue to pay off in the future.
CBS started back in 1927 and has been a pivotal company in shaping the media industry ever since. It came to fame when it aired Orson Welles War Of The Worlds on radio in 1938. During this broadcast, many listeners actually thought the world was being invaded by aliens.
Through the years, CBS has had partnership interests in the following:
- Columbia Records
- Film Production and home video
- Gabriel Toys
They have terminated many of these partnerships and focus solely on television programming. This is where they feel the best avenue for long term growth will come from.
When it comes to earnings of media companies, you have to look at the whole picture. For years these companies relied on advertising to earn money. But now that there is a shift in the way we consume television, there are new ways to earn money. And many times, the old way sees declines.
While looking at the overall picture, they reported great first quarter earnings. The beat earnings per share estimates by $0.08 at $1.04 and they beat revenue estimates by $70 million at $3.34 billion.
But when we look at the details, we see some interesting things.
First, advertising income was down, however affiliate and subscription income was higher, as was subscriber growth.
The company is sticking to its full year 2017 guidance and UBS analysts see earnings for CBS growing 9% in 2017 and 15% in 2018.
Is CBS Stock A Buy?
I like CBS as a long term investment. In the short term, the stock could be volatile based on earning releases. This is because advertising income is going to vary and some investors might get spooked.
But CBS is doing the right things for the long term. They recently sold off their slower growing and not very profitable radio and outdoor advertising ventures. They are not fighting the reality of cord cutting and instead are embracing it by offering CBS All Access and Showtime subscriptions. They are also working with third parties to license content the company owns to be aired on these third party platforms.
Then there are sports. This is the main driver of income for many media companies, airing live sporting events as they happen. They are well placed here with rights to air NFL games, including the Super Bowl, PGA Tour Golf, and NCAA College Football and Basketball to name a few. They also have agreements with other sports leagues as well.
As the price for cable continues to rise and new technology is developed to make cord cutting more feasible for the average person, CBS is ready to take these consumers under their wing and offer an affordable viewing option.
And in time, companies will figure out how to best maximize the advertising on these apps as well. I don’t think advertising revenue will ever be as high as it was in the past, but that is OK as CBS has other income streams it can now start relying on.
At this price, I would be a buyer of CBS stock.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.