Viacom posts higher Q4 revenues on strong ad growth

Reuters

(Adds comments from conference call, details on advertisingoutlook, stock price)

By Liana B. Baker

Nov 14 (Reuters) - Viacom Inc reported a nearly 9percent rise in fiscal fourth-quarter revenue on Thursday,driven by strong advertising growth at its cable networks andimproved television ratings, but forecast weaker ad performancein the current quarter.

While advertising performed well in the quarter, ChiefExecutive Philippe Dauman looked for advertising growth to beweaker sequentially. He said on a conference call that growthwould be increase in the mid single digits in the fiscal firstquarter.

The advertising outlook may have disappointed investors,said Gabelli & Co analyst Brett Harriss, as shares fell 2.1percent after rising in premarket trading.

"That would be a deceleration from this quarter, whereadvertising was up 10 percent," he said.

Dauman blamed the weaker ad outlook on advertisers such asretailers that spent money on commercials earlier in the fall.

Bernstein analyst Todd Juenger also was skeptical thatViacom could sustain the ratings growth, and said Viacom'snetworks still have "excessive reliance on too few hitprograms."

"The obvious question is what happens to ratings and adrevenue as comparisons get harder in the coming quarters?" hewrote in a research note to investors.

The company, which owns cable networks MTV and ComedyCentral and the movie studio Paramount Pictures, said "positiveratings trends" propelled domestic and global advertisingrevenues both increased 10 percent in the quarter.

TV ads rates are closely aligned with ratings. The morepeople who watch a show like "SpongeBob SquarePants," whichappears on its juggernaut Nickelodeon kids cable channel, themore money a network can get for a commercial.

Earlier this year, Viacom struggled with ratings, especiallyon Nickelodeon, but it was able to turn the network around witha revamped program lineup in recent quarters.

Analysts noted that ratings at Viacom's Nickelodeon, MTV,Spike, BET and Comedy Central networks all increased in thequarter.

Pivotal Research Group analyst Brian Wieser said theadvertising bump beat his estimate of 6 percent.

"Advertising revenue was well ahead of expectations" whichis a good sign, Wieser said, because advertising is one of themost important metrics on which Viacom investors focus.

For the same quarter, rival cable network DiscoveryCommunications Inc reported a 12 percent gain inadvertising, while Time Warner Inc said advertising forits cable networks was up 11 percent.

Wieser added that Thursday's results helped to alleviate"the fears that kids were gravitating away from TV and thatadvertisers would follow suit."

REVENUE TOPS ESTIMATES

Viacom posted total revenue of $3.65 billion, compared with$3.363 billion a year ago. Analysts expected $3.6 billion,according to Thomson Reuters I/B/E/S.

Revenue at the filmed entertainment unit increased 11percent to $1.21 billion, driven by zombie movie "World War Z"and "Star Trek Into the Darkness," which both did well when theyhit the home release market.

Viacom net income totaled $804 million, or $1.68 per share,compared with $650 million, or $1.26 per share, a year ago.

Adjusted for items such as restructuring, diluted EPS fromcontinuing operations was $1.55, which beat Wall Streetestimates by 11 cents.

The stock fell $1.74 to $81.39 on the Nasdaq. (Editing by Jeffrey Benkoe)

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