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CBS (CBS) posted Q4 figures Thursday after the bell. The broadcaster, which competes with Disney's (DIS) ABC, General Electric's (GE) NBC, and News Corp.'s (NWS) Fox, said it made 25 cents per share on an adjusted basis. The growth rate wasn't bad at 19%, but unfortunately, expectations were only met. I know, meeting expectations isn't necessarily the worst thing in the world, but let's remember how the analyst game operates: beating estimates is all that matters.
But meeting expectations wasn't the most disappointing part of the story -- far from it. Instead, the flat top line and the decline in cash flow were more relevant elements. Net cash from operations for all of 2009 was a little under $940 million. There was over $2.1 billion generated from operations in 2008.
Free cash flow, as you can imagine, also took a hit. It dropped by roughly 50%. The amount was a lot higher than the dividend obligation, so in that regard, things were okay.
At its basic core, the CBS thesis is dependent on a belief that the worst is behind the advertising industry. Management highlighted improving trends in the release, as well as the broadcaster's healthy ratings status.
I tend to agree with the idea that CBS will find itself in a stronger financial position down the line. However, the company has a long journey ahead of itself in terms of winning over income investors who used to love the dividend quality of the stock. To that end, execs have to increase their aggression when it comes to controlling programming costs. It's great to look for new revenue streams, and focusing on growing retransmission fees is smart, but expensive content production needs to be addressed as well. It probably should be the top priority.
For the most part, I think CBS did as well as it could have given the tough-but-getting-better environment. I am not going to buy the stock at this time. CBS under $10 per share was multiple times more interesting to me than CBS above $13 per share (the stock closed yesterday at $13.71). Give me a dip, and I'll give another look.
Disclosure: I own Disney, GE; positions can change without notice.
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