CBS Corp (CBS.N) beat Wall Street profit forecasts on Wednesday and predicted a record-breaking 2012 driven by, an improving U.S. economy, higher fees from pay-TV distributors and strong political advertising revenue in a contentious election season.
The company said advertising pricing at its flagship network is currently up mid-teens percentage points on increasing demand while local broadcasting is also seeing acceleration from a down fourth quarter. Executives also highlighted the growing importance of the automotive category as an advertiser for the year ahead.
The company, which has traditionally been a advertising-led business model across national and local TV, radio and outdoor billboards, has focused in recent quarters in diversifying revenues in an evolving media sector.
That push has led to CBS driving for new carriage fee revenue from cable, satellite and phone TV carriers as well as local broadcasters called retrans and reverse compensation.
"I am confident the numbers from these areas -- retrans, reverse comp, streaming and international -- will grow every single year, and that is why 2012 and many years to come are positioned to be even better," said Chief Executive Les Moonves in a conference call with analysts.
Moonves said a previous forecast of $250 million retrans revenue for $250 milllion in 2012 was a "low number" and did not include revenue from local stations.
CBS has also earned new revenue by licensing some of its library shows for streaming on the Web by Netflix Inc and Amazon.com. Moonves said it is also in talks to produce an original show for Netflix.
Moonves said the company will benefit from robust political revenue in 2012 especially in the second half of the year in the run-up to the U.S. Presidential elections in November.
He said some estimates expect total political advertising spend to come in around $2 billion and he said CBS would typically take somewhere around 9 percent to 10 percent.
"What I am especially pleased about is not only are we taking a large share from our TV stations, but radio is now becoming a bigger player in that area as well," said Moonves.
CBS posted a better-than-expected rise in fourth quarter profit as lower expenses helped offset the absence of political advertising spending and CSI syndication revenue that boosted the year-ago results.
Quarterly net income rose to $370 million, or 57 cents per share compared with $283 million, or 42 cents a share a year ago.
Analysts on average forecast profit of 53 cents, according to a poll by Thomson Reuters I/B/E/S.
Revenue fell 3 percent to $3.78 billion.
"These were solid results. Advertising was flat in the network but the local businesses are finally starting to come round," said Gabelli & Co analyst Brett Harriss.
For the fourth quarter, revenue at CBS's entertainment division was down 1 percent at $2 billion as digital revenues and retransmission carriage fees offset the absence of CSI syndication revenue.
Revenue was down 1 percent at its publishing and outdoor units. Its cable networks unit, which includes Showtime, rose by 7 percent to $395 million.
(Reporting By Yinka Adegoke; Editing by Bernard Orr)