CBS (CBS) Stock Falls on Discovery Communications' Weak Guidance, Ad Revenue Growth

NEW YORK (TheStreet) -- Shares of CBS  (CBS) fell 5.46% to $51.46 in afternoon trading Tuesday after fellow media company Discovery Communications  (DISCA) posted weak guidance and ad revenue growth.

The company reported ad revenue growth of just 1% in the third quarter. Discovery said a distribution decline weighed down domestic advertising growth in the quarter.

Discovery also reduced its revenue guidance for the full year. The company now expects revenue in the range of $6.3 billion to $6.35 billion for the year, down from its previous estimate of a range of $6.45 billion and $6.53 billion, and below analysts' expectations of $6.41 billion.

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CBS reports third-quarter earnings after the market close Wednesday.

Separately, TheStreet Ratings team rates CBS CORP as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CBS CORP (CBS) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, reasonable valuation levels, growth in earnings per share, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Media industry and the overall market, CBS CORP's return on equity exceeds that of both the industry average and the S&P 500.
  • CBS CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CBS CORP increased its bottom line by earning $2.92 versus $2.48 in the prior year. This year, the market expects an improvement in earnings ($3.11 versus $2.92).
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.98 is somewhat weak and could be cause for future problems.
  • 43.60% is the gross profit margin for CBS CORP which we consider to be strong. Regardless of CBS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CBS's net profit margin of 13.77% compares favorably to the industry average.
  • You can view the full analysis from the report here: CBS Ratings Report

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