CBS Earnings 'Disappointing', Streaming Surging

Shares of CBS Corp.—the parent company of the namesake TV network, Simon & Schuster publishers, and the Showtime premium cable channel—slumped in after-hours trading Thursday on disappointing fourth-quarter results.

Forbes reports profit at the New York-based company was $561 million, or $1.49 per share, reversing a year-ago loss of $41 million, or 10 cents per share, reflecting the spin-off of CBS's radio business. Revenue in the three-month period ended December 31, 2018, rose 3% to $4.02 billion, from $3.92 billion. Wall Street analysts on average expected CBS to earn $1.53 on revenue of $4.15 billion.

Among the highlights was a 7% increase in advertising revenue driven by strong demand from the mid-term elections. The company also announced that it had reached its goal of eight million subscribers for its CBS All Access and Showtime streaming services nearly two years ahead of schedule. As a result, CBS's affiliate and subscription fee revenues rose 11% to $1.03 billion. The company has set a new 2022 goal of getting 25 million subscribers for both direct-to-consumer services.

Lowlights included content licensing and distribution revenue, which fell 11% to $1.06 billion because of "timing issues" regarding several large international and domestic sales that weren't specified in the company's earnings release. Results at the company's entertainment business, its largest since it includes CBS, fell 1% to $2.83 billion while operating income dropped 6% to $438 million.

Wall Street analysts are expecting CBS to merge with its former corporate sibling Viacom before the end of the year, a deal that controlling shareholder Shari Redstone has wanted for years and had to battle a Moonves-backed lawsuit to get. The combined companies would have a market capitalization of roughly $30 billion, a fraction of the market value of rivals such as Walt Disney ($165 billion) and Comcast ($169 billion). CBS will have to go on a shopping spree in order to avoid being overwhelmed by its much larger rivals. Among the rumored targets are Discovery Communications and Sony Pictures Entertainment.