Viacom And CBS: Are Management Changes Really Catalysts?

This week, CBS Corporation (NYSE: CBS) announced that CEO Les Moonves will be replacing Sumner Redstone as Chairperson of the company. In the wake of the decision, Viacom, Inc. (NASDAQ: VIAB) announced that it will also be holding a board meeting this week, presumably to address its own management issues. On Thursday morning, CNBC reported Viacom CEO Philippe Dauman would replace Redstone on its board.

In a new report, AB Bernstein analyst Todd Juenger discusses his impressions of the management shakeups at these two media giants and how they will impact share prices.

For CBS, Juenger doesn’t see any material benefit from the change other than the indirect implications of the move. He believes that the Chairperson change indicates that a Viacom buyout is now off the table, which opens the door for a potentially more beneficial acquisition.

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Although Bernstein expects a positive knee-jerk market reaction to Viacom’s potential shakeup, Juenger believes that there’s nothing the company can do to stop the secular decline in its core business.

“Hence, after the expected short-term increase in VIAB share price, we expect the Under-perform thesis on the stock will be stronger than ever based on the fundamental merits of the company’s growth, risk, and RIOC (not to mention that one of the factors that could blow up a short has now been spent),” he explains.

Bernstein maintains a Market-Perform rating on CBS.

Disclosure: the author holds no position in the stocks mentioned.