Shares of CBS (NYSE: CBS) are no longer rolling around in the pits of equity hell. Do you recall when they were trading around $3 per share? Nasty time it was. Amazingly, as I write this, CBS is hovering near a 52-week high. They are well over $12 in value.
Yet, when I look at the latest earnings report, I don't feel as upbeat as the market. According to the press release (the link goes to a .pdf file), revenues were flat for the third quarter and adjusted income dropped to 25 cents per share from the year-ago figure of 39 cents per share.
That isn't even the worst part. Cash flow is. Net cash from operations took a dive of more than 50% over the last three quarters. And while positive free cash flow was generated over that same time period, there was negative free cash flow in Q3 itself.
So, don't call me impressed by the quarter. I particularly want to see CBS improve its cash-flow characteristics and return to the day when it was considered a useful vehicle for producing dividend income. The current yield just isn't what it used to be.
For those who might say I'm not seeing the big picture, I assure you, I do. I know we're in an advertising slump and that we will eventually be out of it. Disney's (NYSE: DIS) ABC, News Corp.'s (NASDAQ: NWS) FOX, and General Electric's (NYSE: GE) NBC are all feeling it, so CBS is not unique. Plus, CBS is doing well in the ratings business.
But when I juxtapose the financial fundamentals against the recent stock move, I tend toward the notion of booking gains. If I had a profitable position in CBS, I would take at least some of the spoils off the table. I would then revisit the company on a pullback.
Disclosure: I own Disney, GE; positions can change without notice.
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