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Paramount (PARA) Q3 Earnings Beat on Streaming Service Strength
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Paramount Global (PARA - Free Report) delivered adjusted earnings per share of 30 cents in third-quarter 2023, which beat the Zacks Consensus Estimate of 8 cents.
Revenues increased 3% year over year, owing to a rise in Direct-to-Consumer (DTC) and Filmed Entertainment revenues, partially offset by a decline in TV Media revenues.
DTC revenues increased 38% year over year to $1.69 billion, driven by subscriber growth and improvements in engagement and monetization, which exceeded forecasts and led to a profit beat for the company. The figure beat the Zacks Consensus Estimate by 0.92%.
DTC subscription revenues soared 43% year over year to $1.3 billion, driven by pricing increases for Paramount+ and revenues from pay-per-view events.
Paramount+ revenues grew 61%, driven by subscriber growth and increased advertising revenues. Paramount+ subscribers reached approximately 63 million, which beat the Zacks Consensus Estimate by 0.48%, with 2.7 million additions in the quarter. The company witnessed 46% growth in total viewing hours across Paramount+ and Pluto.
The majority of Delta's daily domestic customers now have in-flight access to Paramount+. Recently, the company completed the first year of its partnership with Walmart+, which continues to add to Paramount+ subscribers and grow viewer engagement.
The launch of Paramount+ with the SHOWTIME plan, a cornerstone integration that makes Paramount+ the new streaming home for SHOWTIME, has been aiding advertising revenue growth.
Filmed Entertainment revenues increased 14% year over year to $891 million which beat the Zacks Consensus Estimate by 7.71%. Theatrical revenues increased 63% year over year to $377 million, beating the Zacks Consensus Estimate by 24.23%.
Filmed Entertainment continued to drive significant value across the company, including theatrical, streaming and licensing. The third quarter included the extensions of multiple popular franchises like Mission: Impossible – Dead Reckoning Part One, Teenage Mutant Ninja Turtles: Mutant Mayhem and PAW Patrol: The Mighty Movie.
Declining TV Media Revenues Create Near-Term Concerns
Paramount Global has significant exposure to the large but declining linear Pay-TV business and faces the risk of these businesses declining faster than expected, as well as risk around the ability to pivot and reinvest linear cash flows into other business lines, such as streaming.
Paramount remains heavily exposed to Linear TV (54% of revenues from Advertising and Affiliate Fees, plus 13% from TV Licensing/ Other) compared with large Media peers like Disney, Warner Bros. Discovery and Netflix. The decline of Linear TV is expected to remain a major headwind.
After widespread speculation that the Screen Actors Guild – American Federation of Television and Radio Artists’ strike could end shortly after the Writers Guild of America’s deal was reached in late September, the actors’ strike continues to drag on, partially to blame for the TV Media advertising deceleration.
The challenging ad environment, including international markets and lower licensing revenues, declined to $4.6 billion. The programming is an important component of the streaming product and content production for third parties is impacted by the strikes. Near-term challenges in the ad market continue to weigh on revenue trends for the network.
OIBDA took a $60 million hit for idle costs to retain production capabilities during the strike and the related delay of Mission: Impossible 8 to 2025 leaves Paramount without its tentpole 2024 summer release.
Some of the release slate for the service is impacted by strikes, but the portfolio of content, including theatrical releases hitting the streaming window and the increase in sports availability, can still present an attractive service. The latter is also likely to support ad revenues due to the premium that programming has often received.
PARA has been adjusting its release slate in light of production delays, though films slated for the first half have largely been completed. An installment in the A Quiet Place franchise moved to fill the opening created by the delayed release of the finale to Mission Impossible.
Zacks Rank & Stocks to Consider
Paramount currently carries a Zacks Rank #5 (Strong Sell).
Image: Bigstock
Paramount (PARA) Q3 Earnings Beat on Streaming Service Strength
Paramount Global (PARA - Free Report) delivered adjusted earnings per share of 30 cents in third-quarter 2023, which beat the Zacks Consensus Estimate of 8 cents.
Revenues increased 3% year over year, owing to a rise in Direct-to-Consumer (DTC) and Filmed Entertainment revenues, partially offset by a decline in TV Media revenues.
DTC revenues increased 38% year over year to $1.69 billion, driven by subscriber growth and improvements in engagement and monetization, which exceeded forecasts and led to a profit beat for the company. The figure beat the Zacks Consensus Estimate by 0.92%.
DTC subscription revenues soared 43% year over year to $1.3 billion, driven by pricing increases for Paramount+ and revenues from pay-per-view events.
Paramount+ revenues grew 61%, driven by subscriber growth and increased advertising revenues. Paramount+ subscribers reached approximately 63 million, which beat the Zacks Consensus Estimate by 0.48%, with 2.7 million additions in the quarter. The company witnessed 46% growth in total viewing hours across Paramount+ and Pluto.
The majority of Delta's daily domestic customers now have in-flight access to Paramount+. Recently, the company completed the first year of its partnership with Walmart+, which continues to add to Paramount+ subscribers and grow viewer engagement.
The launch of Paramount+ with the SHOWTIME plan, a cornerstone integration that makes Paramount+ the new streaming home for SHOWTIME, has been aiding advertising revenue growth.
Filmed Entertainment revenues increased 14% year over year to $891 million which beat the Zacks Consensus Estimate by 7.71%. Theatrical revenues increased 63% year over year to $377 million, beating the Zacks Consensus Estimate by 24.23%.
Filmed Entertainment continued to drive significant value across the company, including theatrical, streaming and licensing. The third quarter included the extensions of multiple popular franchises like Mission: Impossible – Dead Reckoning Part One, Teenage Mutant Ninja Turtles: Mutant Mayhem and PAW Patrol: The Mighty Movie.
Declining TV Media Revenues Create Near-Term Concerns
Paramount Global has significant exposure to the large but declining linear Pay-TV business and faces the risk of these businesses declining faster than expected, as well as risk around the ability to pivot and reinvest linear cash flows into other business lines, such as streaming.
Paramount remains heavily exposed to Linear TV (54% of revenues from Advertising and Affiliate Fees, plus 13% from TV Licensing/ Other) compared with large Media peers like Disney, Warner Bros. Discovery and Netflix. The decline of Linear TV is expected to remain a major headwind.
After widespread speculation that the Screen Actors Guild – American Federation of Television and Radio Artists’ strike could end shortly after the Writers Guild of America’s deal was reached in late September, the actors’ strike continues to drag on, partially to blame for the TV Media advertising deceleration.
The challenging ad environment, including international markets and lower licensing revenues, declined to $4.6 billion. The programming is an important component of the streaming product and content production for third parties is impacted by the strikes. Near-term challenges in the ad market continue to weigh on revenue trends for the network.
OIBDA took a $60 million hit for idle costs to retain production capabilities during the strike and the related delay of Mission: Impossible 8 to 2025 leaves Paramount without its tentpole 2024 summer release.
Some of the release slate for the service is impacted by strikes, but the portfolio of content, including theatrical releases hitting the streaming window and the increase in sports availability, can still present an attractive service. The latter is also likely to support ad revenues due to the premium that programming has often received.
PARA has been adjusting its release slate in light of production delays, though films slated for the first half have largely been completed. An installment in the A Quiet Place franchise moved to fill the opening created by the delayed release of the finale to Mission Impossible.
Zacks Rank & Stocks to Consider
Paramount currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the Consumer Discretionary sector are PlayAGS (AGS - Free Report) , AMark Precious Metals (AMRK - Free Report) and American Public Education (APEI - Free Report) . American Public Education currently sports a Zacks Rank #1 (Strong Buy), and PlayAGS and AMark Precious Metals carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
PlayAGS, AMark Precious Metals and American Public Education are each scheduled to report their quarterly results on Nov 7.
The Zacks Consensus Estimate for AGS’ third-quarter 2023 earnings per share is pegged at 1 cent, up from a loss of 1 cent over the past 30 days.
The Zacks Consensus Estimate for AMRK’s third-quarter 2023 earnings is pegged at $1.88 per share, up 1.1% over the past 30 days.
The Zacks Consensus Estimate for APEI’s third-quarter 2023 loss is pegged at 25 cents per share, which has remained unchanged over the past 30 days.