Pivotal Updates Models For CBS, Viacom And Discovery Communications

Pivotal Research updated its models for CBS Corporation (NYSE: CBS), Viacom, Inc. (NASDAQ: VIAB) and Discovery Communications Inc. (NASDAQ: DISCA) Wednesday ahead of Q4 earnings.

Analysts led by Brian Wieser noted that “operating estimates have been tweaked to reflect slightly softer 4Q14 trends in advertising than we previously incorporated in our models, although the bigger picture trends that support the value of these stocks remain in place.”

“At CBS, we expect slightly better than flat revenue growth on the broadcast network, aided by incremental NFL-related revenue. Growth from retransmission consent should help too, but international licensing faces difficult comparables. Cable and local broadcasting will help (with political advertising helping the local TV stations in particular) but we only forecast +0.6 percent total top-line revenue growth for the company as a whole during 4Q14,” according to Wieser.

The firm maintained a Buy rating a $68 price target on CBS, which recently traded at $54.40, down 2.16 percent.

For Viacom, Wiser predicted that “high margin non-advertising revenue streams will help support durable growth in the long-run despite near-term ad weakness. Paired with margin improvements we see significant cashflow and share buybacks which support a much higher share price. With $2.6bn in cashflow next year, rising towards $3.4bn in 2019, we see an equity valuation of $40bn, or $104 per share on a YE2015 basis, at which time we expect 8 percent fewer shares to be outstanding vs. 4Q14.”

The firm maintained a Buy rating a $104 price target on Viacom, which recently traded at $68.20, down 6.10 percent.

“Discovery should fall near the low end of recent guidance for 2014, constrained by deceleration in national TV advertising the US and worsening foreign exchange trends (disproportionately impacting Discovery given its footprint). The company has some positive domestic trends to point to (new leadership at the flagship Discovery and growing viewership levels at Velocity and OWN, for example) and its international expansion continues to offer significant promise,” according to the analyst report.

The firm maintained a Buy rating a $39 price target on Discovery Communications, which recently traded at $30.00, down 3.86 percent.