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Why Is Viacom (VIAB) Down 18.4% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Viacom Inc. (VIAB - Free Report) . Shares have lost about 18.4% in that time frame, underperforming the market.

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

Viacom Surpasses Earnings & Revenue Estimates in Q3

Viacom performed impressively in the third quarter of fiscal 2017 (ended Jun 30, 2017) reporting better-than-expected earnings per share 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 11.4% on a year-over-year basis. Results were aided by higher revenues.

Total revenue in the quarter was $3,364 million, up 8.3% 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%.

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.

Bleak Outlook

The company said that it expects domestic affiliate revenues to decline in low single digits in the fiscal fourth quarter.

How Have Estimates Been Moving Since Then?

Following the release, investors witnessed a downward trend in fresh estimates. There have been five revisions lower for the current quarter. In the past month, the consensus estimate has shifted down by 11.4% due to these changes.

Viacom Inc. Price and Consensus

 

Viacom Inc. Price and Consensus | Viacom Inc. Quote

VGM Scores

Currently, the stock has a poor Growth Score of F, however its Momentum is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

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

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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