CBS Corporation (NYSE: CBS) traded lower on Friday morning, a day after the company reported modest second-quarter earnings and revenue beats.
Analysts say CBS’s CEO scandal and its legal battle with a majority shareholder make the stock too risky for long-term investors, and investors received no clarity on the company’s ongoing legal concerns as the company reported its quarterly results.
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CBS reported second-quarter earnings per share of $1.12 on revenue of $3.47 billion. Both numbers came in slightly above consensus analyst estimates of $1.11 and $3.46 billion, respectively. Revenue was up 6 percent from a year ago.
CBS said its CBS All Access and Showtime streaming services are on track to hit a combined 8 million subscribers by 2019, one year ahead of its previous goal. CBS expects that subscriber count to double to 16 million by 2022.
Advertising revenue was up 2 percent to $1.32 billion. Content licensing and distribution revenue was up 4 percent to $1.09 billion. Affiliate and subscription fees revenue was up 17 percent to $989 million.
“CBS’ strong second quarter puts us firmly on track to deliver the record full-year results we have forecast,” CEO Leslie Moonves says in a statement.
Looking ahead, CBS reiterated previous full-year guidance for high teens EPS growth and high-single-digit revenue growth.
At the beginning of the earnings call, CBS said it would only answer questions directly related to quarterly results on the advice of counsel. Moonves did not discuss the allegations made by six women in a New Yorker article last week that Moonves demonstrated inappropriate sexual behavior in the workplace. CBS has hired two independent law firms to investigate the claims.
CBS also did not comment on its ongoing legal battle with majority shareholder Shari Redstone, who is pushing to merge CBS and Viacom ( VIA, VIAB). CBS has sued Redstone’s company National Amusements.
Bank of America analyst Jessica Reif says CBS delivered a solid quarter, but the stock is too much of a risk given the legal uncertainty.
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“Although we continue to believe CBS remains well positioned to drive value creation on a standalone basis, at present, we view the company’s ongoing Delaware lawsuit against National Amusements and senior leadership uncertainty as significant overhangs for shares that will likely restrain outperformance until the court has ruled,” Reif says.
Bank of America has a “neutral” rating and $58 price target for CBS stock.
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CBS Corporation’s Legal Woes Outweigh Its Earnings Beat originally appeared on usnews.com
