CBS Corporation's (CBS) second-quarter 2011 earnings of $0.58 per share beat the Zacks Consensus Estimate of $0.45 and surged more than double from $0.25 earned in the year-ago quarter, buoyed by a favorable operating environment and cost-containment efforts. The quarter saw a step up in both the advertising marketplace as well as margins.
Management remains confident about continued growth momentum in fiscal 2011 and 2012. However, the significant potential risk is CBS's high dependence on advertising revenue, which is driven by the health of the economy. To mitigate this, the company is striving to add diverse revenue streams to hedge against economic cycles, which include retransmission, affiliate and online distribution fees.
Further, CBS's substantial liquidity, positions it to drive future growth and enhance shareholders return. We have a long-term Outperform recommendation on the stock. Our target price of $24.00, 12.8X 2011 EPS, reflects this view.
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