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Viacom (VIAB) Q2 Earnings to Gain from International Growth

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Viacom is slated to report second-quarter fiscal 2018 results on Apr 25.

Earlier this month, CBS Corp (CBS) offered a below market bid for Viacom, which was immediately rejected. The CBS offer of 0.55 shares for each Viacom class B share failed to impress the owner of Nickelodeon and MTV networks.

The company believes a market price of 0.62 is suitable. Notably, it expects cost synergy of $1 billion from the merger.

Notably, Viacom beat the Zacks Consensus Estimate in three of the trailing four quarters, with an average positive earnings surprise of 11.09%. In the last reported quarter, the company’s adjusted earnings beat the Zacks Consensus Estimate by 8 cents.
 

Viacom Inc. Price and EPS Surprise

Viacom Inc. Price and EPS Surprise | Viacom Inc. Quote

 

Viacom’s top-line has also beaten the consensus mark in three of the trailing four quarters. In the last quarter, revenues came in at $3.07 billion, missing the Zacks Consensus Estimate of $3.14 billion and decreased 7.6% from the year-ago quarter.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Shares of Viacom have lost 0.4% on a year-to-date basis as compared with the industry’s decline of 2.5%. The decline can be attributed to the ongoing scuffle over the merger with CBS.

 


 

Moreover, growth projections are muted. The Zacks Consensus Estimate for second-quarter earnings of 80 cents per share represents a year-over-year increase of 1.3%. However, the consensus sales expectations for the second quarter stand at $3.03 billion, representing year-over-year decline of 6.91%.

Viacom is likely to be hurt by weak affiliate revenues in the United States owing to loss of subscribers. The Zacks Consensus Estimate for second-quarter fiscal 2018 affiliate revenues is pegged at $1.14 billion, unchanged on a year-over-year basis.

Moreover, management expects domestic ad revenues to improve sequentially in the second quarter. Ratings improvement, new original programming content, greater carriage benefits from improved distributor penetration and higher contribution from digital initiatives are key catalysts.

However, the company’s performance on the international front is anticipated to be much better driven by expanding market share in Latin America and India.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Viacom has a Zacks Rank #2 and an Earnings ESP of +0.77%, which indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

Here are few stocks you may consider as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.

Western Digital (WDC - Free Report) has an Earnings ESP of +2.30% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Paycom Software (PAYC - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #1.

Xilinx has an Earnings ESP of +5.26% and a Zacks Rank #2.

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