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Viacom Beats on Q4 Earnings, Rev

Zacks Equity Research

Viacom Inc. (VIAB) declared fourth-quarter 2013 financial results with both the bottom and the top line beating the Zacks Consensus Estimate.

Net income from continuing operations in the reported quarter was $739 million or $1.55 per share compared with $626 million or $1.21 per share in the prior-year quarter. The reported figure was above the Zacks Consensus Estimate of $1.44.

Total revenue in the reported quarter was $3,652 million, up 9% year over year and also above the Zacks Consensus Estimate of $3,627 million. Better performances from both the Media Networks and Filmed Entertainment segments have led to the improvement. Quarterly operating income was $1,107 million, up 5% year over year.

During the reported quarter, Viacom bought 33.7 million common shares for $2.7 billion. At the end of the fourth quarter of fiscal 2013, Viacom had $2,403 million in cash & cash equivalent and $11,867 million in outstanding debt on its balance sheet compared with cash and cash equivalent of $848 million and outstanding debt of $8,131 at the end of fiscal 2012. Debt-to-capitalization ratio was 0.70 against 0.52 at the end of fiscal 2012.

Media Networks Segment

Quarterly revenues of $2,460 million inched up 7% year over year, mainly triggered by better advertising, affiliate and ancillary revenues. Quarterly operating profit was $1,035 million, up 11% from the prior-year quarter. Both domestic and worldwide affiliate revenues rose 6% year over year. Both domestic and worldwide advertising revenues surged 10% year over year.  

Filmed Entertainment Segment

Quarterly revenues rose 11% year over year to $1,208 million, mainly driven by popular movie releases. Quarterly operating profit was $291 million, up 49% year over year.

Global Theatrical revenues increased 31% year over year, primarily due to more hit movie releases than the year-ago quarter. Worldwide Home Entertainment rose 24% coupled with a 5% decline in television license fees. However, Worldwide Filmed Entertainment ancillary revenues rose 54%.

Our Take

We believe that Viacom is well positioned for long-term growth as it continues to benefit from its predominantly cable networks-based business model, strong affiliate fee revenue growth, increased number of share repurchase plans, multi-platform content, and is one of the fastest growing traditional ad media.

However, stiff competition from other media companies like News Corp. (NWSA), CBS Corporation (CBS) and Time Warner Inc. (TWX) along with mounting debt may act as headwinds for the stock, going forward.

Currently, Viacom has a Zacks Rank #3 (Hold).

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