CBS reported modest upside to estimates in 3Q09 with most of the excess coming from the syndication business. However, it was still a strong quarter of improvement with the CBS Network returning to positive ad growth, dramatically lower ad revenue declines at the local TV stations, and modest improvement but still deeply negative ad sales at the radio stations and outdoor properties. Furthermore, on the conference call, management noted that Oct and November trends have continued to improve, particularly at the local TV stations which are showing positive growth excluding the huge political spending during 2008's Presidential election.

Management reaffirmed 2009 guidance despite the upside in the third quarter. This disappointed some investors who saw it as a lack of confidence in 4Q ad spending at the TV network. If you add current 4Q EBITDA estimates to year-to-date reported EBITDA you get exactly to the mid point of management's guidance. What the street would have liked was an increase in the low end of guidance to suggest that results would ultimately settle in the top half. I understand that reading but I think it is overly bearish and that the company will reach the high end of its guidance.

For 3Q, CBS reported adjusted EPS of 25 cents against the consensus estimate of 25 cents. Revenues of $3.55 billion exceeded consensus of $3.2 billion. EBITDA of $597 million was ahead of the $538 million consensus. As noted, most of the upside was in syndicated TV sales.

Away from TV, radio showed margin stability which could be a good sign for 2010 if ad revenue declines slow. Outdoor showed little improvement. It was in line with estimates at 20% ad declines but following a better than expected report form competitor Lamar (LAMR), the segment's performance was viewed as disappointing. Interactive lagged at both the revenue and EBITDA lines but you would not know that form listening to the company which remains confident in its web strategy.

I remain bullish on CBS as a pure play on a cyclical ad recovery. The asset base ratings leading competitive positions, which means if a recovery occurs upside could be substantial. I think the shares could reach $15 in 2010 assuming estimates rise modestly toward the high end of current range. Obviously, that is my expectation of what will happen.