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Viacom (VIAB) Surpasses Earnings and Revenue Estimates in Q3

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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.

Segmental Performance

Media Networks

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.

Filmed Entertainment

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.

Viacom Inc. Price, Consensus and EPS Surprise


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

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) .

Bleak Outlook

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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