CBS Corp. (CBS) to Keep Earnings Streak Alive? - Analyst Blog

We expect entertainment giant CBS Corporation CBS to beat expectations when it reports first quarter 2014 results on May 8, 2014.

Why a Likely Positive Surprise?

Our proven model shows that CBS Corp. may beat earnings because it has the right combination of 2 key components.

Positive Zacks ESP: CBS Corp. currently has an Earnings ESP of +1.33%. This is because the Most Accurate estimate stands at 76 cents per share, while the Zacks Consensus Estimate is pegged at 75 cents.

Zacks #3 Rank (Hold): Note that stocks with a Zacks Rank #1, 2 and 3 have a higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of CBS Corp.'s Zacks Rank #3 and Earnings ESP of +1.33% makes us confident of a positive earnings beat on May 8.

What's Driving Better-than-Expected Earnings?

CBS Corp. is benefiting from content monetization and rise in several non-advertising revenue sources such as rising affiliate and retransmission fees. In fact, non-advertising contributed to 42% of the total revenue in 2013, the highest ever.

Moreover, CBS signed several deals with HULU and Amazon AMZN among others to put its programming (Under The Dome and Extant for Amazon, Elementary and Blue Bloods for HULU) on a diverse range of platforms and make this one of the steady sources of revenues. All of these are likely to have a favorable impact in the quarter under review.

CBS Corp. has topped the Zacks Consensus Estimate for the past several years, with a trailing four-quarter average surprise of 5.2%. In the last concluded quarter, the company outdid Zacks' expectations by 2.6%.

Other Stocks to Consider

CBS Corp. is not the only firm we are looking up to this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:

CST Brands Inc. CST with an Earnings ESP of +14.29% holds a Zacks Rank #3 (Hold).

Vitamin Shoppe Inc. VSI has an Earnings ESP of +1.47% and a Zacks Rank #3 (Hold).

Foot Locker, Inc. FL has an Earnings ESP of +1.91% and a Zacks Rank #2 (Buy).