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CBS Issues Strong Second Quarter Results, Content Licensing and Distribution a Key Driver

publication date: Aug 2, 2011
author/source: Valuentum Analysts

CBS Corp. (CBS) reported strong second-quarter results Tuesday that showed excellent performance pretty much across the board. Revenue jumped 8% from the same quarter last year thanks to solid performance in content licensing and distribution, while operating income before depreciation and amortization (OIBDA) jumped over 50% thanks to strong growth in every segment and a seven percentage point improvement in its OIBDA margin. Net income more than doubled, and free cash flow was also strong, with the latter advancing 32% from the same period a year ago. We think increased use of CBS’ library in deals like the one inked with Netflix (which allows the company to generate revenue from old shows at little incremental cost) and Amazon (AMZN) will become a key driver behind its future growth and profitability in coming periods (we estimate profit margins on these deals are 50%-plus). In fact, we would not be surprised to see Google (GOOG) or Apple (AAPL) seeking a large quantity of CBS content in the future to power their respective growth engines. We’ve added the name to our watch list.

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