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Top media analysts have cut their short-term growth prospects for ViacomCBS following last week’s financial disclosures that came as part of the closing of CBS Corp.’s stock-swap takeover deal for Viacom.
In the Oct. 17 filing, CBS Corp. released specific year-to-year projections for its free cash flow yield, guidance that the company has not offered Wall Street in the past. CBS’ numbers were much lower than those modeled in recent months by top Wall Street analysts at MoffettNathanson, Barclays, JPMorgan, Guggenheim, UBS and other banks. The numbers underscore that CBS intends to spend significantly in the coming year to ramp up its investment in content for CBS, Showtime and other platforms.
Filing - Words - CBS - Watcher - Michael
The filing elicited sharp words from longtime CBS watcher Michael Nathanson, who argued that CBS had an obligation to correct analysts about the big gap between their free cash flow models and the actual numbers shaping up inside the company.
From CBS’ perspective, the onus is on the analysts and their modeling, not the company. CBS has issued financial guidance for revenue, earnings per share and operating income before depreciation and amortization (OIBDA) covering three-year periods — guidance that analysts used to help develop annual forecasts for metrics such as free cash flow, which has become an increasingly important barometer of health for media giants.
Year - CBS - Board - CBS - Management
“Over the year, the CBS board and CBS management knew Street numbers were wildly wrong on free cash flow, but somehow never shared that consequential data point,” Nathanson wrote. He was highly critical of CBS allowing analysts to weigh in with their observations on the CBS-Viacom merger prospects prior to the Aug. 13 deal announcement on the basis of what proved to be inaccurate Street estimates for CBS.
CBS’ projections in the S-4 filing had unlevered free cash flow for 2019 coming in at $1.21 billion, compared to MoffettNathanson’s...
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