While CBS (CBS) reported roughly in-line Q2 numbers yesterday, Goldman sees no reason to change their mind about the stock. In fact, the bank has trimmed their target $0.50 to $15.50. Until the consensus estimates come down, Goldman’s going to be a seller:
We continue to believe consensus 2008 and 2009 estimates are too high, not fully reflecting the difficult economic issues, though the company’s guidance adjustment (to low-single digit EBITDA growth from +3%-+5%) may begin to address the disconnect with consensus.
Furthermore, Goldman doesn’t think the cost cuts CBS is undergoing are going to stave off margin compression:
While cost cuts at local TV/radio are a positive, we think the national TV business represents a substantially larger portion of the cost base, and thus cuts that only impact local are unlikely to be enough to avoid sharp margin compression from even modest revenue declines. Longer-term, we believe CBS’ opportunity lies in continuing to aggressively shed slow growth assets and focus on cutting costs, while entering higher growth businesses to change its secular growth profile.
Goldman reiterates SELL on CBS (CBS), target cut from $16 to $15.50.
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