Viacom (VIAB) Earnings, Revenues Beat Estimates In Q2

Viacom, Inc. (NASDAQ:VIAB) performed impressively in the second quarter of fiscal 2017 (ended Mar 31, 2017) reporting better-than-expected earnings per share and revenues. The company’s earnings (on an adjusted basis) of 79 cents per share comfortably beat the Zacks Consensus Estimate of 59 cents. Moreover, the bottom line expanded 3.95% on a year-over-year basis. Results were aided by higher revenues.

Total revenue in the quarter was $3,256 million, up 8.5% year over year. The top line also surpassed the Zacks Consensus Estimate of $3,056.1 million and was boosted by strong growth in its Filmed Entertainment segment.

Quarterly adjusted operating income grew 4% year over year to $612 million. At the end of the second quarter of fiscal 2017, Viacom had $671 million of cash & cash equivalents, and $12,171 million of outstanding debt compared with $379 million and $11,896 million, respectively, at the end of fiscal 2016.

Segmental Performance

Media Networks

Quarterly revenues for this Zacks Rank #3 (Hold) company’s media networks segment were $2.39 billion up 1% year over year. While domestic revenues declined 2% to $1.92 billion, international revenues climbed 11% to $478 million. Foreign currency movements adversely impacted segmental results to the tune of 1%.

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The segment generates revenues principally from three sources: (i) affiliate revenues (ii) advertising revenues; and (iii) ancillary revenues. Affiliate revenues climbed 2% to $1.16 billion owing to increase in revenues both on the domestic and international fronts. However, advertising revenues decreased 1% to $1.11 billion, mainly due to below-par showing on the domestic front.

Moreover, the quarter witnessed ancillary revenues to be flat at $129 million. Domestic ancillary revenues were $70 million, down 8%. Such revenues increased 11% to $59 million on the international front.

Additionally, quarterly operating income (on an adjusted basis) declined significantly to $747 million.

Filmed Entertainment

Quarterly revenues surged 37% year over year to $895 million. Also, this segment saw a massive increase (149%) in ancillary revenues. While home entertainment revenues climbed 29%, license revenues grew 45% and revenues on the theatrical front improved 10%. But the segment reported an operating loss (on an adjusted basis) in the quarter of $66 million, reflecting an improvement from the year-ago loss of $136 million. Higher revenues led to the improvement

Price Movement

Shares of Viacom have underperformed the Zacks categorized Media-Conglomerates industry over the past six months due to its struggles. Shares of the company rallied 4.5% in the last six months, while the industry witnessed gain of 14.6% in the same period.

The outperformance in the fiscal second quarter might provide the stock with the much needed boost.

Our Take

Viacom is leaving no stone unturned to turn around its fortunes. Earlier, Viacom’s proposed merger with CBS Corp. (NYSE:CBS) was cancelled. The merger would have given Viacom a much-needed boost. Also, it has been inking multiple deals of late, in a bid to expand further. To this end, Viacom inked a deal with Telefonica (MC:TEF) S.A (NYSE:TEF) in Nov 2016, to acquire Television Federal S.A. (Telefe).

In another move aimed at combating the challenges, Viacom unveiled a new strategic plan in February. As a part of the plan, it is currently focusing on six of its core brands- BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount.

Upcoming Release

Investors interested in the broader Consumer Discretionary space will keenly await the first-quarter 2017 earnings report of another key player Discovery Communications Inc. (NASDAQ:DISCA) . The company’s results are scheduled to be revealed on May 9.

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