CBS Corporation Upgraded To Buy By Deutsche Bank, PT To $23

Deutsche Bank has published a research report on CBS Corporation CBS and has upgraded the company from Hold to Buy based on the company's successful exposure to advertising and higher financial leverage over the last couple of years. In the report, Deutsche Bank writes "CBS's shares have had a terrific two years given the company's high exposure to advertising and high financial leverage at the trough (3.5x). Nevertheless, from here we see 19% upside to $23, worthy of a Buy rating. We believe the street is too low relative to strong 1H11 ad pacings, the CBS Network should see 10% upfront CPM gains, margin efforts are kicking in, int'l syndication is growing >10%, and M&A risk is reduced given the large buyback plan. Stock at 8.6x ‘11E FCF and 7.0E ‘12E, too low, in our view. Key is the local ad recovery continuing (i.e., strong 1Q11 pacings), CBS continuing its share gains over peers (lead upfront pricing), and mgmt maintaining cost and capital discipline (no M&A, only capital returns). Long-term, mgmt should be able to take advantage of structural dynamics like eliminating film and transit losses, driving retrans and int'l syndication revenue, and repositioning the balance sheet. Outdoor, in particular, seems way below its potential." Deutsche Bank has also raised the price target from $18 to $23 on CBS Corporation, which closed Friday at $19.28.