Viacom's (VIAB) Q2 Earnings And Revenues Surpass Estimates

Viacom Inc. (NASDAQ:VIAB) reported better-than-expected results for the second quarter of fiscal 2018 (ended Mar 31, 2018), wherein both earnings per share and revenues outpaced the Zacks Consensus Estimate.

The company’s adjusted earnings from continuing operations of 92 cents per share surpassed the Zacks Consensus Estimate of 80 cents. Moreover, the bottom line expanded approximately 16.5% year-over-year.

Total revenues of $3.15 billion topped the Zacks Consensus Estimate of $3.04 billion. However, revenues decreased 3% from the year-ago quarter owing to lower revenues from Filmed Entertainment due to “fewer theatrical releases and the performance of Paramount's legacy slate.” This dampened growth of the Media Networks segment.

Quarterly adjusted operating income increased 4.7% year over year to $641 million. Viacom exited the quarter with cash and cash equivalents of $417 million, compared with $394 million at the end of the previous quarter.

Moreover, Viacom’s debt (non-current) at the end of the second quarter of fiscal 2018 was $10.1 billion, at the same level as the prior quarter.

Segmental Performance

Media Networks

Quarterly revenues for the company’s Media networks segment were $2.43 billion, up 1% year over year. The decline in domestic revenues was offset by strong growth internationally.

While domestic revenues were down 3% to $1.86 billion, international revenues surged 18% to $566 million. Foreign currency movements aided segmental results to the tune of 9%.

The segment generates revenues principally from three sources: (i) affiliate revenues (ii) advertising revenues; and (iii) ancillary revenues.

Total affiliate revenues remained flat at $1.16 billion. On the domestic front, the metric was down 4% to $934 million. Nevertheless, international affiliate revenues increased 23% to $222 million.

Total advertising revenues were $1.11 billion, flat year over year. The 11% surge in international advertising revenues to $264 million was offset by 3% decrease in domestic advertising revenues to $841 million.

Ancillary revenues increased 30% to $168 million in the quarter on the back of “consumer product, recreation and live event revenues.”

Quarterly operating income (on an adjusted basis) declined 5% to $706 million in the reported quarter, owing to higher expenses.

Filmed Entertainment

Quarterly revenues declined 17% year over year to $741 million due to weaknesses in three sub-groups.

Notably, licensing revenues increased 37% year over year to $477 million backed by the release of “The Cloverfield Paradox” and Paramount Television product, including “The Alienist.”

However, theatrical revenues were down 79%. Ancillary and home entertainment revenues declined 54% and 18%, respectively, in the reported quarter.

This segment’s adjusted operating income was $9 million in the quarter against loss of $66 million in the year-ago quarter. Decline in distribution expenses owing to lower number of theatrical releases helped the company in posting the encouraging number.

Conclusion

Management is optimistic about double-digit revenue growth internationally with “new channel launches and innovative mobile distribution deals” across Europe and Asia. The increase in audience for the flagship brands is another positive.

The operational efficiency of the company is reflected in its cost savings, which is anticipated to be around $100 million in fiscal 2018. For fiscal 2019 and beyond, management expects “over $300 million in run-rate savings.”

Zacks Rank & Other Stocks to Consider

Viacom carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the technology industry include Twitter, Inc. (NYSE:TWTR) and Western Digital Corporation (NASDAQ:WDC) sporting a Zacks Rank #1 (Strong Buy) and Time Warner (NYSE:TWX) with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for Twitter, Western Digital and Time Warner, are projected to be 21.5%, 19% and 6.6%, respectively.

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