Viacom (VIAB) Q4 Earnings Miss, Revenues Beat Estimates

Viacom, Inc. (NASDAQ:VIAB) reported mixed results in the fourth quarter of fiscal 2017 (ended Sep 30, 2017), wherein revenues outpaced the Zacks Consensus Estimate but earnings lagged the same.

The company’s earnings (on an adjusted basis) of 77 cents per share missed the Zacks Consensus Estimate of 85 cents. The bottom line, however, expanded 11.6% on a year-over-year basis owing to lower expenses and higher costs.

Total revenues in the quarter was $3,319 million, up 2.9% year over year. The top line surpassed the Zacks Consensus Estimate of $3,240.5 million. The outperformance can be primarily attributable to growth in the Media Networks and Filmed Entertainment units.

Quarterly adjusted operating income grew 7% year over year to $578 million. At the end of fiscal 2017, Viacom had $1,389 million of cash & cash equivalents and $11.1 billion of debt (non-current) compared with $379 million and $11.9 billion, respectively, at the end of fiscal 2016.

The company’s cash balance during the quarter was boosted by the sale of a non-core asset. Moreover, Viacom is looking to bring down its debt levels.

Segmental Performance

Media Networks

Quarterly revenues for the company’s Media networks segment were $2.55 billion, up 3% year over year. The improvement came on the back of strong growth in advertising revenues on the international front. While domestic revenues declined 2% to $1.96 billion, international revenues surged 24% to $593 million. Foreign currency movements aided segmental results to the tune of 4%. The acquisition of Telefe boosted international revenues.

The segment generates revenues principally from three sources: (i) affiliate revenues (ii) advertising revenues; and (iii) ancillary revenues. Affiliate revenues declined 1% to $1.15 billion, hurt by decrease in subscribers on the domestic front. Consequently, affiliate revenues declined 3% to $948 million on the domestic front.

Advertising revenues increased 6% year over year to $1.22 billion, mainly owing to higher revenues on the international front. Advertising revenues were flat at $936 million on the domestic front. Ancillary revenues increased 5% to $181 million in the quarter, on the back of strong growth in international consumer products

Quarterly operating income (on an adjusted basis) declined 8% to $693 million in the reported quarter, due to higher programming expenses.

Filmed Entertainment

Quarterly revenues improved 2% year over year to $789 million on the back of the 30% increase in licensing revenues. This segment, however, witnessed a fall in Theatrical revenues to the tune of 43%. While Home entertainment revenues declined 5%, Ancillary revenues rallied 33%. This segment reported an operating loss (on an adjusted basis) of $43 million.

Annual Results

For fiscal 2017, the company’s earnings (on an adjusted basis) climbed 2% to $3.77 per share. Also, revenues increased 6% to $13.26 billion. The Zacks Consensus Estimate for earnings is pegged at $3.86 per share on revenues of $13.19 billion.

Another Important Development

Of late, Viacom announced the renewal of a distribution deal with Charter Communications (NASDAQ:CHTR) . Additionally, the companies have joined hands for the co-production of original content and collaboration of advanced advertising.

Zacks Rank & Stocks to Consider

Viacom has a Zacks Rank #4 (Sell). Better-ranked stock in the Media Conglomerates industry are Liberty Media Corporation (NASDAQ:FWONA) (NASDAQ:FWONK) and Pearson (LON:PSON) PLC (NYSE:PSO) . Both the stocks carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Liberty Media and Pearson have gained more than 9% and 2%, respectively, over the last six months.

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