Status as the No. 1 network ensures strong advertising revenue. It also provides leverage to win fee disputes with pay TV distributors, including Time Warner Cable – which largely relented to CBS’s terms after a monthlong blackout in several major cities in early September.
CBS has estimated fees from distributors will reach $1 billion by 2017, but investors have latched onto CEO Les Moonves’ comments this month that the goal is “probably very conservative” and might easily be exceeded as existing deals are renewed in 2015 and 2016.
Those fees, plus the looming conversion of its U.S. outdoor billboard business into a real estate investment trust, are expected to generate billions in revenue that the company is expected to use to buy back shares.
Last week, Evercore financial analyst Alan Gould estimated CBS could reduce its outstanding shares by 34 percent by 2015, prompting him to lift his price target to $65 from $55.
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