Nomura Raises CBS Price Target On 'Robust' Content, Stable Finances

Nomura is taking a bullish view on CBS Corporation CBS pricing ahead of the media giant’s May 4 first-quarter earnings report.

CBS faces some comparative challenges — such as lower estimates for local ad revenue, with less political advertising and one less NFL playoff game this quarter than in 2016, analysts Anthony DiClemente and Benjamin Black said in a Thursday note.

But the company’s earnings content pipeline “is robust” and its earnings estimates are “firmly in the fairway,” according to Nomura.

“Overall, we remain constructive on CBS’s 2017/18 story, its steady capital returns, its financial discipline with respect to M&A, its retrans growth, and the company’s innovative [over-the-top] products,” DiClemente and Black said.

Nomura maintains a Buy rating on CBS and raised its price target from $72 to $74.

Year-Over-Year Ad Revenue Likely To Dip

Nomura lowered its estimates for CBS’ Q1 local media revenue — from $459 million to $416 million — and operating income from $137 million to $123 million.

Ad market conditions are healthy, the analysts said, and “modestly positive” underlying ad growth expected. The lower estimates can be ascribed to a difficult comparison with CBS’ numbers in 2016, an election year flush with political advertising and a successful Super Bowl, according to Nomura.

The first quarter also has one fewer NFL playoff game than before, DiClemente and Black said.

Content Is King

The Eye Network has three shows for sale in 2017, according to Nomura: “NCIS: New Orleans,” “Scorpion” and “Madam Secretary.”

The firm maintains a positive outlook on licensing growth for both CBS and its cable/satellite subsidiary Showtime.

CBS is fresh off the February signing of a content distribution deal with Verizon Communications Inc. VZ that will likely lead to growth in retransmission revenue, the Nomura analysts said. The firm is projecting $1.25 billion in retransmission and reverse compensation revenue for the year.

Baseball Is Just The Beginning: Expect Facebook To Go After More Sports To Grow Video Segment

The Biggest Fan Of The NFL (Outside Of America): Mexico