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Why Is ViacomCBS (VIAC) Up 6.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for ViacomCBS (VIAC - Free Report) . Shares have added about 6.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ViacomCBS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

ViacomCBS Q2 Earnings Top Estimates, Revenues Fall Y/Y

ViacomCBS’s second-quarter 2020 adjusted earnings of $1.25 per share beat the Zacks Consensus Estimate by 25.9%. The bottom line, however, declined 16% year over year.

Revenues of $6.28 billion beat the Zacks Consensus Estimate by 2.5% but fell 12% year over year.

Adjusted OIBDA increased 8% from the year-ago quarter to $1.69 billion.

Selling, general and administrative expenses decreased 10.9% year over year to $1.22 billion.

Revenues by Type

Advertising revenues of $1.93 billion dropped 27% year over year. While Domestic revenues were down 24%, International revenues deteriorated 43%.

The year-over-year decline was primarily attributed to negative impact of coronavirus on global advertising demand, tough comparison, and cancellation and postponement of professional golf tournaments.

However, Affiliate revenues of $2.19 billion climbed 2% year over year. Domestic revenues grew 2% while International revenues declined 5%.

Affiliate revenues benefited from growth in station affiliation and retransmission fees, as well as subscription-streaming revenues, which more than offset declines in pay-TV subscribers.

Domestic streaming and digital-video revenues increased 25% year over year to $489 million, driven by 52% growth in streaming-subscription revenues and robust growth in Pluto TV-advertising revenues. Domestic streaming subscribers reached 16.2 million, up 74% year over year.

Pluto TV’s domestic monthly active users (MAUs) were 26.5 million, up 61% year over year. Pluto TV entered 17 Latin American markets and achieved robust adoption. The platform’s total global MAUs reached 33 million.

In April, ViacomCBS inked a partnership with Verizon, which covers pay TV, connected television and mobile, including a significant expansion of Pluto TV’s footprint.

Content-licensing revenues of $1.90 billion were unchanged. Coronavirus-induced production delays hurt top-line growth.

Theatrical revenues of ViacomCBS were immaterial in the reported quarter due to the closure of movie theaters in response to coronavirus.

Other revenues fell 34% year over year to $42 million.

Segment Details

ViacomCBS’ TV Entertainment revenues declined 22% year over year to $2.29 billion due to negative impact of coronavirus on the advertising market and lower content-licensing revenues.

TV Entertainment’s adjusted OIBDA decreased 36% from the year-ago quarter to $392 million.

Cable Networks revenues of ViacomCBS inched up 2% year over year to $3.23 billion, driven by licensing of domestic streaming rights of South Park.

Cable Networks’ adjusted OIBDA increased 30% from the year-ago quarter to $1.29 billion, driven by lower programming costs primarily due to scheduling changes and the cancellation of events as a result of coronavirus. Lower advertising and promotion costs also benefited profitability.

ViacomCBS’ Filmed Entertainment revenues declined 26% year over year to $647 million. Home-entertainment revenues jumped 30%, driven by favorable mix oftitles in release, including Sonic the Hedgehog, and higher sales of catalog titles. Licensing revenues decreased 20% due to lower revenues fromlicensing of catalog titles.

Adjusted OIBDA was $116 million, up 22% year over year driven by lower distribution costs due to the absence of theatrical releases in the reported quarter, as well as the strong performance of Sonic the Hedgehog in the home-entertainment market.

Publishing revenues of ViacomCBS were down 8% year over year to $200 million, due to lower print-book sales negatively impacted by the coronavirus outbreak.

Adjusted OIBDA increased 9% year over year to $38 million in the reported quarter.

Balance Sheet

As of Jun 30, 2020, ViacomCBS had cash and cash equivalents of $2.29 billion compared with $589 million as of Mar 31, 2020.

Total debt as of Jun 30, 2020 was $20.07 billion compared with $18.54 billion as of Mar 31, 2020.

In the second quarter, ViacomCBS raised $4.5 billion of capital and used the proceeds to redeem $2.8 billion of near-term maturities, including a $340 million redemption that settled on Jul 10, 2020.

Cash flow from operating activities was $795 million compared with $356 million in the previous quarter and $260 million in the year-ago quarter.

Free cash flow was $714 million compared with $305 million in the previous quarter and $862 million in the year-ago quarter.

Post Q2 Developments

In July, ViacomCBS announced a multi-year renewal with DISH Network and Sling TV. The company also continued to benefit from strong reverse compensation and recently signed agreements with Sinclair and Cox.

Moreover, in July, ViacomCBS unveiled its plan to transform CBS All Access into a rebranded super service. The company remains on track to relaunch this differentiated streaming service in early 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 9.87% due to these changes.

VGM Scores

Currently, ViacomCBS has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, ViacomCBS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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