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Earnings Preview: Ads in focus for CBS' 4Q

Advertising trends are in focus for broadcasting giant CBS Corp., which reports its fourth-quarter earnings after the market closes on Wednesday.
/ Source: The Associated Press

Advertising trends are in focus for broadcasting giant CBS Corp., which reports its fourth-quarter earnings after the market closes on Wednesday.

WHAT TO WATCH FOR: Modest advertising revenue growth despite the quarter coming in a non-election year, when political advertising revenue dries up. Media peers that own local TV stations such as The Walt Disney Co. and News Corp. have reported ad revenue declines due to a drop in political advertising.

But CBS has been a leader in audience ratings and that could translate into CBS taking more ad dollars from its peers.

The company has made efforts to shrink the percentage of revenue that comes from advertising so it is not as impacted by the ups and downs of the business cycle. Now, about half of its revenue comes from ads, down from more than 70 percent a few years ago, according to Wedge Partners analyst Martin Pyykkonen. The other half comes from sales of TV shows to other networks and digital video operators, fees from pay TV distributors, its outdoor billboards and premium pay TV channel Showtime.

WHY IT MATTERS: CBS's fortunes are still largely tied to the ad market and by extension, the state of the economy. While revenue gains coming out of the recent recession have been tapering off, analysts will look for the company's read on the ad market in the current quarter and heading into the rest of the presidential election year.

WHAT'S EXPECTED: CBS is seen posting adjusted earnings of 53 cents per share on revenue of $3.9 billion.

LAST YEAR'S QUARTER: A year ago, CBS reported earnings of 46 cents per share on revenue of $3.9 billion.