We view CBS Corp.(CBS) as one of the best stocks to buy, for its solid and favorable fundamentals, coupled with high analyst recommendations. 31 analysts on average set a “Overweight” rating on the stock.
Best Stock Buying Oppurtunity:
CBS Corp.(CBS) on Thursday, July 26, 2012, said the company plans to repurchase a total of $4.7 billion of stock before the end of 2014, and will increase its quarterly dividend amount. This will increase the return to shareholders in cash to the historical highest level.
Benjamin Swinburne, an analyst at Morgan Stanley said that this new repurchase authorization is $1.7 billion higher than the approved $3 billion. This means the company will buy back approximately $1.24 billion of stock each year in the future. Since the inception of the original stock repurchase program in January 2011, CBS has spent $1.7 billion in the repurchase of non-voting Class B shares.
Media companies are usually able to get a lot of cash, and their capital expenditures are relatively low. Investors have begun to put pressure on media companies to ask for more cash return to shareholders, and tend to adopt the form of stock buybacks and dividends.
Although CBS has increased its stock repurchase amount, but its stock repurchase program is still lower than many of the same industry competitors. The Walt Disney Company (DIS) repurchased $5 billion of stock in the year as of October 1, 2011, and repurchased $1.67 billion worth of stock in the half year as of March 2012. News Corporation (NWS) has repurchased shares of $4.89 billion since July last year and plans to continue repurchasing $5.1 billion before June next year. Time Warner bought back $4.9 billion worth of stock from January 1, 2011 to February 3, 2012.
Dividend Raise:
In addition to the stock repurchase program, CBS will increase its quarterly dividend from the original 10 cents per share to 12 cents per share. CBS currently pays a dividend yield of 1.30% and at a payout ratio of 18.00%, this means the company has big potential for the future dividend growth.
Financials:
For Q1 2012 ended March 31, CBS posted earnings per share of 54 cents, representing a 22.70% surprise over the average analyst estimate of 44 cents and a 86.21% increase over the figure of 29 cents a year ago. Revenue was $3.92 billion, 11.79% higher than $3.51 billion in the same period of last year.
Analysts averagely CBS would post earings of 59 cents per share for Q2 2012 and $2.50 per share for the full fiscal year 2012.
Stock performance:
On Thursday, July 26, 2012, CBS stock price soared 4.89%, or $1.52, to $32.63, on a volume of 7.18 million shares versus the daily average of 5.84 millio shares. The stock crossed its 50-day moving average Tursday, and is currently 3.13% higher than its 50-day moving average and 18.84% higher than its 200-day moving average of $29.44, which are standing at $31.64 and $29.44, respectively.
Over the past 52 weeks, CBS stock price fluctuated between $17.99 and $35.00 and the current stock price is 6.77% off the high. Since the beginning of this year, CBS stock price has accumulatively risen more than 20%. According to the data provided by FactSet Research, 31 analysts on average set a “Overweight” rating and a price target of 38.46 on the stock, this means a 17.79% upside space for the current stock price and suggests this is one of the best stocks to buy currently. CBS stock is traded as a bargain at a trailing P/E multiple of 12.49 by comparison to the peer group average of 20.18 and at a PEG ratio of 0.90 by comparison to the peer group average of 0.90. CBS currently has a market cap of $21.15 billion.
