It has been about a month since the last earnings report for Viacom Inc. (VIAB - Free Report) . Shares have added about 10.3% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is VIAB due for a pullback? 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's Q1 Earnings Beat
The company’s earnings (excluding 30 cents from non-recurring items) of $1.03 per share surpassed the Zacks Consensus Estimate by 8 cents. However, total revenues in the quarter was $3,073 million, falling short of the Zacks Consensus Estimate of $3,240.5 million.
Moreover, both earnings per share and revenues declined on a year-over-year basis. The bottom line contracted approximately 1% due to high costs. The top line declined 7.6% owing to lacklustre performances at both the company’s divisions — Media Networks and Filmed Entertainment.
Quarterly adjusted operating income declined 4% year over year to $717 million. Viacom exited the quarter with cash and cash equivalents of $394 million, compared with $1,389 million at the end of the fourth quarter of fiscal 2017 (ended Sep 30,2017). We note that the company’s cash balance during the fiscal 2017 fourth quarter was boosted by the sale of a non-core asset.
Moreover, Viacom is looking to bring down its debt levels. Viacom’s debt burden (non-current) at the end of the first quarter of fiscal 2018 stood at $10.1 billion, compared with $11.1 billion at the end of the fourth quarter of fiscal 2017.
Quarterly revenues for the company’s Media networks segment were $2.56 billion, down 1% year over year. The downside was owing to lower affiliate revenues. While domestic revenues declined 6% to $1.93 billion, international revenues surged 18% to $631 million. Foreign currency movements aided segmental results to the tune of 5%. The acquisition of Telefe, apart from Viacom’s growth in Europe boosted international revenues.
Total affiliate revenues declined 4% to $1.09 billion, hurt by decrease in subscribers on the domestic front. Consequently, affiliate revenues declined 8% to $907 million on the domestic front. International affiliate revenues increased 18% to $187 million.
Advertising revenues increased 1% year over year to $1.31 billion. The uptick was owing to higher revenues on the international front, which increased 22% to $371 million. Advertising revenues declined 5% to $937 million on the domestic front. Ancillary revenues increased 5% to $158 million in the quarter, on the back of favorable foreign currency movements.
Quarterly operating income (on an adjusted basis) declined 7% to $913 million in the reported quarter, owing to higher expenses.
Quarterly revenues declined 28% year over year to $544 million owing to weaknesses in all sub-groups. Theatrical revenues declined 48%, while licensing revenues shrunk 13% year over year. Additionally, ancillary and home entertainment revenues declined 38% and 25% respectively in the reported quarter. This segment reported an operating loss (on an adjusted basis) of $130 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 10.3% due to these changes.
Viacom Inc. Price and Consensus
At this time, VIAB 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 B on the value side, putting it in the second quintile 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.
The company's stock is suitable solely for value based on our styles scores.
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise VIAB has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.