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Viacom (VIAB): Corporate Issues to Hurt Earnings in Q3?

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Viacom Inc. VIAB is set to release third-quarter fiscal 2016 results, before the opening bell on Aug 4.

In the last quarter, the company missed the Zacks Consensus Estimate by 2.56%. Let’s see how things are shaping up for this announcement.

Factors at Play

Viacom’s key problem at the moment is the corporate battle between its ailing Chairman Sumner Redstone and the current Chief Operating Officer Paul Dauman. Redstone and his daughter are looking to remove Dauman from his post while Dauman and some other executives are against the move. Sumner Redstone also wants Dauman removed from a trust which would decide the company’s leadership in case something happens to Redstone. There is a lawsuit which has been filed in this regard from those opposing the move and as per media reports the lawsuit is expected to proceed as per court ruling. Moreover, the company is likely to be impacted by the underperforming cable TV industry, delay in completing a major Subscription Video on Demand (SVOD) agreement and corporate governance related issues.

The company still seems to be attempting to recover from a slump as can be seen from its recent multi-picture agreement with IMAX Corp. (IMAX - Free Report) and the content sharing deal with Sony Corporation SNE. However, the company’s latest guidance estimates sales decline of 4%. Viacom expects earnings per share (EPS) in the range of $1.00 to $1.05 for the third quarter. The Zacks Consensus Estimate of $1.02 is within the projected EPS range.

VIACOM INC-B Price and EPS Surprise

VIACOM INC-B Price and EPS Surprise | VIACOM INC-B Quote

Earnings Whispers

Our proven model does not conclusively show that Viacom is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: The Earnings ESP for the company currently stands at 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at $1.02.

Zacks Rank: Viacom carries a Zacks Rank #5 (Strong Sell). Please note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum as is the case for Viacom.

A Stock to Consider

Here is a company you may want to consider as our model shows it has the right combination of elements to post an earnings beat this quarter.

Analog Devices, Inc. ADI has an earnings ESP of +2.63% and a Zacks Rank #2.

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