Earnings Preview: Ad trends eyed in CBS 3Q report

CBS Corp., the broadcast network controlled by Sumner Redstone, reports its third-quarter earnings Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Advertising trends will be the focus of CBS Corp.'s third-quarter earnings, and if ad prices at sister company Viacom Inc. are any indication, the market for commercial time on TV improved in the third quarter.

Viacom, which like CBS is majority controlled by 86-year-old Redstone, reported Tuesday that prices for ad slots were 10 percent or more above rates earlier in the year, when TV networks sold the bulk of their fall season inventory.

CBS ended the quarter before its popular late-night host David Letterman revealed a man was trying to blackmail him over sexual relationships with women who worked for him - news which provided a big boost to ratings. Letterman had already been winning the ratings war in late night against NBC's Conan O'Brien.

In October, Redstone's holding company, National Amusements Inc., said it was selling some of its stake in CBS Corp. and Viacom Inc. as well as 35 movie theaters to pay off its debts. Dedham, Mass.-based National Amusements said it would raise up to $343.7 million from the sale of shares of CBS, but retain more than 79 percent voting control of both companies.

The sale, the second batch of shares sold by Redstone to deal with the debt crisis at National Amusements, appeared to solve its near-term debt maturities and ease fears of further stock sales.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect earnings per share to fall 44 percent to 22 cents, on a 5 percent drop in revenue to $3.19 billion.

ANALYST TAKE: Caris & Co. analyst David Miller took Redstone's share sale to indicate that the stock was overpriced. Last month, he set a "Sell" rating and an $8 price target on the shares, about a third below their closing price of $11.97 on Tuesday.

WHAT'S AHEAD: CBS, like News Corp., is actively trying to renegotiate its retransmission agreements with cable and satellite operators that carry the CBS network signal and those from its local TV stations.

Success in those dealings could result in a boost to earnings, but Miller notes that CBS lacks cable network channels, other than its pay-TV service Showtime, to provide it with leverage in talks.

STOCK PERFORMANCE: Shares of CBS rose 75 percent over the period, to $12.05 on Sept. 30 from $6.89 on June 30.