Viacom (VIAB) Down 15.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Viacom (VIAB). Shares have lost about 15.9% in that time frame, underperforming the S&P 500.

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

Viacom Q3 Earnings Beat Estimates, Revenues Up Y/Y

Viacom reported third-quarter fiscal 2019 adjusted earnings of $1.20 per share that beat the Zacks Consensus Estimate by 17 cents. The figure increased 3% year over year on a constant-currency (cc) basis.

Revenues of $3.36 billion lagged the Zacks Consensus Estimate of $3.38 billion but increased 6% year over year at cc.

Selling, general and administrative (SG&A) expenses increased 12.1% year over year to $828 million.

Adjusted operating income decreased 1.3% from the year-ago quarter to $757 million.

Media Networks Details

Media Networks revenues were $2.50 billion, up 3% year over year at cc. Affiliate revenues were flat year over year, while advertising revenues increased 7%. Consumer Products, Recreation and Live Events (previously the Ancillary segment) revenues declined 16% at cc.

Domestic revenues were down 1% on a year-over-year basis to $2.02 billion. International revenues increased 7% at cc to $483 million.
 
Domestic advertising revenues grew 6%, driven by 84% year-over-year jump in Advanced Marketing Solutions (AMS) revenues. Domestic affiliate revenues declined 1% on subscriber loss.

Viacom delivered strong Upfront results, with high single to double-digit price increases. Agency commitments across its digital, social and advanced advertising portfolio also improved.

Comedy Central achieved its ninth consecutive quarter of share growth, up 6% year over year. Paramount Network share grew 11% year over year.

Telefe maintained the #1 position in ratings for 19 straight months. Channel 5, Comedy Central and Paramount Network International also recorded share growth on a year-over-year basis in the reported quarter.

Viacom International Media Networks’ delivered strong growth at cc. International advertising revenues increased 9% on strong growth in Argentina and the U.K.

Affiliate revenues increased 8% owing to growth in linear as well as SVOD and other OTT deliveries.

Video views grew 17% year over year to 5.9 billion. Watch time increased 85% year over year, with 9.6 billion minutes viewed.

Filmed Entertainment Details

Filmed Entertainment revenues increased 14% year over year to $877 million.

Theatrical revenues of $152 million fell 27%. While Rocketman generated more than $185 million, revenues from Pet Sematary were more than $110 million at the global box office.

Paramount’s film slate for the remainder of fiscal 2019 includes Dora and the Lost City of Gold.

For fiscal 2020, Paramount’s film slate now has 16 films, including Gemini Man, Terminator: Dark Fate and the sequel to Top Gun, among others.

Paramount Television has 26 shows ordered to or in production, including the third season of 13 Reasons Why, which is premiering on Netflix in the second half of 2019.

New series ordered includes Shantaram for Apple, Made for Love and Station Eleven for HBO Max; When the Street Lights Go On for Quibi; and Sexy Beast for Paramount Network.

Paramount Television is also producing The Angel of Darkness, the sequel of limited series The Alienist for TNT and the second season of Boomerang for BET.

Home entertainment revenues increased 35% year over year to $161 million. Licensing revenues rose 29% year over year to $521 million. Ancillary revenues grew 5% to $43 million.

Pluto TV Details

Pluto TV’s monthly active users (MAUs) increased 50% to-date this calendar year. It is now integrated on Comcast’s Xfinity X1 and set to launch on Cox Communications’ Contour video and broadband platforms.

During the quarter, Pluto TV launched 28 channels and continued to expand its international presence. In July, it launched Pluto TV Latino, a suite of 11 channels with more than 2,000 hours of programming in Spanish and Portuguese.

Pluto TV was also added to the U.K. on-demand platform, My5.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -14.18% due to these changes.

VGM Scores

At this time, Viacom has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Viacom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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