Needham & Company Maintains a 'Buy' on CBS (CBS); 3Q11 ROIC Analysis and FY12 Outlook
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Price: $40.77 --0%
Rating Summary:
20 Buy, 12 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
20 Buy, 12 Hold, 3 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Needham & Company maintains a 'Buy' on CBS (NYSE: CBS) price target of $30.00.
Needham analyst says, "There is currently a 93% correlation between FY12E ROIC and media industry share prices. Wall St closely follows the income statement, ie, the numerator. In this quarterly report, we analyze the denominator - trends in assets employed, capital intensity, and free cash flow. Highlights from CBS’s capital allocation in the 9/30/11 quarter included: 1. Return of Capital. If shares plus debt are shrinking, this implies less capital is being used in the business, which implies rising ROICs. Average Shares Outstanding fell by 11mm ($350mm) in 3Q11, but Net Debt rose by $395mm in 3Q11. Therefore, capital returned to capital markets was about zero. CBS also prepaid $200mm of pension obligations in 3Q11, which has significant tax benefits. 2. CapX trends are a lead-indicator of ROIC growth. CBS’s CapX fell 3% to $57mm in the 3Q11, and is down 7% year-to-date, implying improving ROICs. 3. TV & Film. CBS spends 8x more on buying and making TV and film programming than it does on capital spending. CBS’s TV and Film inventory totaled $2.0B at 9/30/12, about flat over the past two years. 4. Total Assets fell by $115mm (0.4%) to $26.1B in 3Q11. Net assets employed rose by $284mm while cash balances fell by $399mm. 5. Cash From Operations posted lower results in 3Q11, down 73% y/y to $86M, but is up 7% to $1.7B year to date."
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 $25.64 yesterday.
Needham analyst says, "There is currently a 93% correlation between FY12E ROIC and media industry share prices. Wall St closely follows the income statement, ie, the numerator. In this quarterly report, we analyze the denominator - trends in assets employed, capital intensity, and free cash flow. Highlights from CBS’s capital allocation in the 9/30/11 quarter included: 1. Return of Capital. If shares plus debt are shrinking, this implies less capital is being used in the business, which implies rising ROICs. Average Shares Outstanding fell by 11mm ($350mm) in 3Q11, but Net Debt rose by $395mm in 3Q11. Therefore, capital returned to capital markets was about zero. CBS also prepaid $200mm of pension obligations in 3Q11, which has significant tax benefits. 2. CapX trends are a lead-indicator of ROIC growth. CBS’s CapX fell 3% to $57mm in the 3Q11, and is down 7% year-to-date, implying improving ROICs. 3. TV & Film. CBS spends 8x more on buying and making TV and film programming than it does on capital spending. CBS’s TV and Film inventory totaled $2.0B at 9/30/12, about flat over the past two years. 4. Total Assets fell by $115mm (0.4%) to $26.1B in 3Q11. Net assets employed rose by $284mm while cash balances fell by $399mm. 5. Cash From Operations posted lower results in 3Q11, down 73% y/y to $86M, but is up 7% to $1.7B year to date."
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 $25.64 yesterday.
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