CBS reported an 8% increase in second quarter earnings, beating analysts'… (David Paul Morris / Bloomberg )
Broadcasting giant CBS Corp. increased its second-quarter profit 8%, although the company's revenue slipped -- which might not ease concerns on Wall Street that the advertising market has cooled.
For the quarter that ended June 30, the company beat analysts' profit estimates. CBS on Thursday reported net earnings of $427 million, or 65 cents a share, up from $395 million, or 58 cents, for the year-earlier period. CBS said its earnings were the highest in the company's history.
CBS generated $3.47 billion in revenue in the quarter, down 3% from $3.59 billion in the second quarter of 2011.
The broadcaster serves as a bellwether for the U.S. advertising market because it is the nation's largest company that derives so much of its revenue from advertising. The company has the nation's most popular television network, CBS; a fleet of television and radio stations; cable channel Showtime; and the Simon & Schuster publishing house.
The company had tougher comparisons for the period because its Netflix digital streaming deal was initiated during the second quarter of last year, boosting revenue in that quarter. In addition, the semifinals of the NCAA college championship tournament came during the first quarter of this year, whereas last year it occurred during the second quarter, making for an uneven comparison.
The company's core entertainment division, which includes the CBS Television Network, CBS Television Studios and CBS Interactive, generated $1.71 billion in revenue, a 7% decrease from the year-earlier period. Cable television revenue was up 8% to $446 million. Publishing revenue rose 3% to $189 million, reflecting growth in digital book sales.
CBS' local television stations more than held their own, with revenue increasing 2% to $704 million, reflecting increased ad spending by auto manufacturers and political candidates. The outdoor division's revenue slipped 2% to $481 million, largely because of unfavorable effect of foreign exchange rates.
However, CBS holds the contract for ads displayed in London's underground and it will benefit from the London Olympics during the current quarter.
"Even in an uneven economy our financial health is superb," CBS Chief Executive Leslie Moonves told analysts on a conference call Thursday afternoon. "We expect political spend to accelerate in the third quarter, right up to the fourth quarter."
Moonves attributed perceived softness in the ad market to the London Olympics. Many advertisers reserved their dollars during the second quarter in order to buy time on rival network NBC during the Games, currently underway. NBCUniversal has sold more than $1.2 billion in ads on its television networks, television stations and the Internet for its coverage of the Olympics.
CBS expects the ad market to roar back when it and other broadcast networks unveil their new fall schedules. Advertising by auto companies remains strong, CBS executives said.
"We are ready for the gun to go off in September," Moonves said.
CBS, with its strong complement of TV stations, is expected to rake in hundreds of millions of dollars in political ad money from now until the November elections.