Viacom, Inc. (VIAB - Free Report) performed impressively in the third quarter of fiscal 2017 (ended Jun 30, 2017) with better-than-expected earnings and revenues. The company’s earnings (on an adjusted basis) of $1.17 per share comfortably beat the Zacks Consensus Estimate of $1.05. The bottom line also expanded 11.43% on a year-over-year basis. Results were aided by higher revenues.
Total revenue in the quarter was $3,364 million, up 8.27% year over year. The top line surpassed the Zacks Consensus Estimate of $3,342.4 million, boosted mainly by strong growth in Filmed Entertainment segment.
Quarterly adjusted operating income grew 5% year over year to $805 million. At the end of the third quarter of fiscal 2017, Viacom had $425 million of cash & cash equivalents and $11.17 billion of outstanding debt compared with $379 million and $11.91 billion, respectively, at the end of fiscal 2016.
Quarterly revenues for the company’s Media networks segment were $2.56 billion, up 2% year over year. While domestic revenues were flat at $2.04 billion, international revenues climbed 8% to $522 million. Foreign currency movements affected segmental results to the tune of 5%.
The segment generates revenues principally from three sources: (i) affiliate revenues (ii) advertising revenues; and (iii) ancillary revenues. Affiliate revenues rose 4% to $1.19 billion, banking on an increase in revenues both on the domestic as well as international fronts. Advertising revenues inched up 2% year over year to $1.24 billion, mainly owing to higher revenues on the international front.
However, Ancillary revenues declined 9% to $135 million in the quarter, primarily due to a massive 17% fall in Domestic Ancillary revenues.
Additionally, quarterly operating income (on an adjusted basis) was flat at $870 million in the reported quarter.
Quarterly revenues surged 36% year over year to $847 million. This segment also saw a massive soar (189%) in Theatrical revenues. While Home entertainment revenues climbed 14%, Ancillary revenues rallied 61% and revenues from Licensing rose 1%. This segment reported an operating income (on an adjusted basis) of $9 million, thereby reflecting an improvement from the year-ago operating loss of $26 million. Higher revenues led to this upside.
Other Major Developments in the Quarter
Viacom entered into a multi-year advertising and content distribution deal with Altice USA, Inc. (ATUS - Free Report) . The company redeemed over $1 billion of senior notes and debentures for executing the sale of its stake on ESSA Pharma Inc. (EPIX - Free Report) .
The company said that it expects domestic affiliate revenues to decline in low single digits in the fiscal fourth quarter. The view displeased investors. Consequently, the stock fell in after-market trading on Aug 3, despite the outperformance in fiscal third quarter.
Zacks Rank & Key Pick
Viacom carries a Zacks Rank #3 (Hold). A better ranked stock in the Media Conglomerates industry is Time Warner Inc. , sporting a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Time Warner gained over 6% on a year-to-date basis.
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