CBS Corp. (CBS): If A Viacom Deal Occurs, It Will Be Beneficial To CBS - Brean Capital

September 29, 2016 7:11 AM EDT
Get Alerts CBS Hot Sheet
Price: $63.04 +1.25%

Rating Summary:
    23 Buy, 7 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 11 | Down: 20 | New: 54
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Brean Capital analyst, Alan Gould, reiterated his Buy rating on shares of CBS (NYSE: CBS) on the assumption that if Viacom and CBS were recombined, it would be structured with a premium to the CBS shareholders.

The analyst believes the Viacom (NASDAQ: VIAB) shares, trading at 6x cable network EBITDA, currently discount its challenges and the CBS shares, trading at only 13x 2016E EPS despite a mid-teens growth rate, are largely discounting a recombination with Viacom.

If the companies are recombined, the big question is whether or not the new company retains or sells Paramount. Does Les Moonves want the additional scale of owning a major studio and try to turn it around with the assumption that he can always chose to sell it later as it is one of only 6 major studios, four of which (and possibly 5) are definitely not for sale? Or does he believe that Paramount has been so underinvested in the past few years that it will be too capital intensive to fix and he is better off selling Paramount effectively lowering the cost of combining with the VIA cable networks to less than 6x EBITDA excluding synergies?

No change to the price target of $65.

For an analyst ratings summary and ratings history on CBS click here. For more ratings news on CBS click here.

Shares of CBS closed at $54.15 yesterday.

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