CBS Gains the Most in Four Years After Online Efforts Pay Off

(Bloomberg) -- CBS Corp. Chief Executive Officer Leslie Moonves, under pressure to merge with sister company Viacom Inc., seized the chance this week to point out that his business is doing just fine on its own.

After the media giant's online efforts helped offset declining viewership at its broadcast network, first-quarter earnings and sales both sailed past analysts' estimates on Thursday. That sent the stock on its biggest surge in almost four years.

The growth may bolster Moonves's argument that his team should remain in control if CBS merges with Viacom. While Viacom reported a decline in sales this past quarter, CBS boosted sales 13 percent. Key to the success: the creation of online services, and locking down positions for CBS programming at distributors like Hulu and YouTube.

“In an era where others are concerned about losing subscribers caused by cord cutting and other matters, CBS is growing its subscribers,” Moonves said on a call with analysts.

Earnings reached $1.34 a share in the period, excluding some items. Analysts had predicted profit of $1.19.

In the wake of the results, the stock climbed as much as 6 percent to $51.66 on Friday, making the biggest intraday gain since June 2014. They had been down 17 percent this year through Thursday's close.

Moonves has been locked in negotiations with his controlling shareholder, the Redstone family, over whether the future of CBS should include Viacom, owner of MTV and Nickelodeon. Viacom has lost subscribers and struggled to gain a footing in new online offerings, which is one reason the Redstone family would like the two businesses to team up.

Conflicting Views

Boards of the companies have been discussing a merger for a couple months but are at an impasse over management of the combined entity. Moonves would like to run the unified company, and have his current executive team alongside him. Shari Redstone, the vice chairman of CBS, would like Viacom chief Bob Bakish to be Moonves's second-in-command.

CBS didn't directly address the merger talks in its earnings report. Still, Moonves pointed to the results as further evidence that it has the right strategy.

CBS is extracting higher fees from traditional pay-TV distributors. And the company predicted a strong year of advertising sales, thanks in part to the midterm elections in the U.S. Ad sales were up 1 percent at the CBS network, and 11 percent overall -- helped by the acquisition of an Australian TV network.

Online Revenue

The company also generates more revenue for each new subscriber online, whether it's for CBS-owned services All Access and Showtime, or internet packages from others. CBS said it was well on its way to its target of 8 million subscribers for All Access and Showtime by 2020.

The growth of these online services has eased investor concerns about a company that still largely reliant on traditional TV, a business in decline. Viewership of CBS has fallen 8 percent this year, and the network has ceded first place to NBC, which televised the Super Bowl and the Olympics. CBS still claims six of the 10 most watched shows among the broadcast networks.

It's “not enough to win now,” Moonves told analysts on the call. “We must also strategically position ourselves to win for many years to come.”

To contact the reporter on this story: Lucas Shaw in Los Angeles at lshaw31@bloomberg.net.

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net.

©2018 Bloomberg L.P.