After Wednesday's closing bell, the media giant reported revenue of $3.51 billion, lower than the consensus estimate of $3.95 billion. Adjusted earnings were $1.11 per share, which beat analysts' estimate by a penny.
Shares of CBS were essentially flat on Thursday afternoon after opening negative.
The company reported advertising revenue for the quarter declined 2.8% year over year to $1.8 billion, hurt by CBS having three fewer Thursday Night Football games, as well as lower NFL ratings.
But the lower-than-expected top-line results didn't deter Wall Street from focusing on CBS's other efforts, particularly those related to content distribution.
CBS said affiliate and subscription revenue jumped 13% year-over-year to $770 million, helped by fees from digital distribution services such as its online streaming service, CBS All Access, and the Showtime standalone streaming service. CBS also licenses content to a variety of over-the-top content platforms, including those of Netflix(NFLX) - Get Report , Hulu, Amazon(AMZN) - Get Report and Apple(AAPL) - Get Report .
"We have either development or production with Amazon, with Hulu, etc., etc., Netflix obviously," CBS CEO Leslie Moonves said on the company's earnings call. "So there's a lot of activity."
"Obviously, the wireless companies as well as the SiliconValley companies are all looking at the content companies as being very valuable," Moonves explained on the call. "But we feel very secure in who we are, and we're going to continue to play the game that way."
Following the results, Wall Street remained largely bullish on CBS stock, with several analysts issuing price target increases. Here's what they had to say about the quarter:
Daniel Salmon, BMO Capital Markets (Outperform, price target raised to $73 from $70)
"The overarching message was that the five-year targets laid out last March are already looking conservative, particularly OTT revenues from both direct-to-consumer and digital multichannel video programming distributors. With the radio transaction in motion [a merger with Entercom Communications(ETM) - Get Report in lieu of an IPO] and [retransmission revenue] expected to grow another 25% this year, our "best mix shift in media" thesis is accelerating."
Anthony DiClemente, Nomura (Buy, PT raised to $72 from $70)
"With a year of impressive earnings growth behind, 2017 appears to be more of a transition year for CBS, with difficult comparisons to last year's Super Bowl and political advertising. That said, underlying trends are being described as 'phenomenal' by the CEO and appear to meet or even exceed expectations; one key example of this is OTT subscribers -- the company classified its prior long-term guidance as 'conservative' (though stopped short of providing sub updates for Showtime OTT or CBS All Access)."
Steven Cahall, RBC Capital Markets (Outperform, PT raised to $78 from $70)
"CBS is delivering against the strategy that it framed last year including OTT subs, [retransmission revenue], licensing deals and cash deployment. Its risks within a changing ecosystem are below [those of] peers, and the quality of its content is excellent."
Andy Hargreaves, Pacific Crest Securities (Sector Weight)
"We view the risk/reward on CBS as neutral. Core trends appear stable, and CBS is well positioned to be included in all bundles. However, continued declines in viewership seem likely, which, along with a relatively full valuation, in our view, prevents a more positive view of the shares."
John Janedis, Jefferies (Buy, $71 PT)
"Less than a year after CBS set its initial goal of reaching a total of 8 million subs on its OTT platforms, the co. stated that it is tracking ahead of its plan, although no updated target was given. As original programming is added to All Access, the sub growth should accelerate further, with early reviews for The Good Fight solid."
Vijay Jayant, Evercore ISI (Buy $75 PT)
"Importantly, management seemed to reinforce during the earnings call that the company remains well on track to reach a series of long-range growth targets laid out at its investor day in March of 2016. ... Last month we named CBS as a top pick for 2017 -- we reiterate this call as the company continues to diversify its growth sources beyond its best-in-class broadcast network."
Brian Wieser, Pivotal Research (Hold, $67 PT)
"Bottom-line metrics were impacted by adjustments on the quarter, including for an opportunistic pension plan initiative, a restructuring charge and a write-down associated with the disposition of the radio station [operations]. ... Overall, the margin improvement establishes a higher base against which future year profitability can be driven, offsetting what looks like lighter revenues in 2017 vs. what we previously incorporated into our model."