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Viacom (VIAB) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Viacom VIAB is slated to report second-quarter fiscal 2019 results on May 10.

Notably, the company beat the Zacks Consensus Estimate in the trailing four quarters, the average positive earnings surprise being 9.8%.

In the last reported quarter, adjusted earnings of $1.12 per share beat the Zacks Consensus Estimate by a dime. The figure increased 13% year over year on a constant-currency (cc) basis.

However, revenues of $3.09 billion lagged the Zacks Consensus Estimate of $3.10 billion. The figure increased 4% year over year at cc.

The Zacks Consensus Estimate for second-quarter earnings has increased couple of cents to 82 cents over the past 30 days, indicating a decline of 10.9% from the year-ago quarter's reported figure. The consensus mark for sales is pegged at $3.03 billion, suggesting a decrease of 3.7% from the figure reported in the year-ago period.

Viacom Inc. Price and EPS Surprise

Viacom Inc. Price and EPS Surprise | Viacom Inc. Quote


Let’s see how things are shaping up prior to this announcement.

Factors to Watch Out

The turnaround of Paramount is benefiting Viacom. However, Theatrical revenues are expected to be negatively impacted by a weak slate of movie releases in the to-be-reported quarter.

Nevertheless, increasing investments in original content and focus on providing quality entertainment are driving audience for Viacom’s flagship brands like MTV, BET and Comedy Central.

MTV’s resurgence is noteworthy. Viacom cited Nielsen data, per which MTV has dominated prime time rating growth for six consecutive quarters (fiscal fourth-quarter 2017 to first-quarter fiscal 2019). It is also the fastest growing network in prime among the Top 40 cable and broadcast networks.

MTV’s strong adoption among the 18-34 demography surely bodes well for Viacom’s top line in second-quarter fiscal 2019.

Additionally, Nickelodeon unveiled new shows that are expected to have boosted viewer engagement in the soon-to-be-reported quarter.

Viacom International Studios (VIS) has gained significant traction within a short span of time, courtesy of partnerships with Amazon, Cablevision, Fox Network Group Latin America, Netflix and Telemundo.

However, domestic ad revenues are likely to remain subdued (down 100 basis points) in the to-be-reported quarter due to the late Easter holidays. Moreover, investments in Advanced Marketing Solutions (AMS), digital, next-generation products and studio initiatives are expected to negatively impact margins in the to-be-reported quarter.

Acquisition Highlights

During the quarter, Viacom completed the acquisition of Pluto TV for $340 million. However, this is not expected to have any material impact on second-quarter results.

Pluto TV offers more than 100 live linear channels and more than 5,000 hours of on-demand content, including movies, news, sports, general entertainment and digital series. It is universally available across mobile devices, desktops, streaming players and gaming consoles, and had more than 12 million monthly active users at the end of December 2018.

Viacom acquired Pluto TV to attract and retain users for its existing subscription-based services, including Noggin and Comedy Central Now. Further, the deal enhances the company’s AMS business by adding billions of quality addressable ad impressions per month. Moreover, the acquisition expands Viacom’s addressable market by bringing in additional audience, who are young, gender-balanced and hard to reach.

The acquisition is expected to be accretive to revenue growth and slightly dilutive to earnings in fiscal 2019.

Moreover, in the quarter to be reported, Viacom’s Nickelodeon bought Sparkler, an early childhood learning technology platform. The deal expands the educational value of Nickelodeon’s Noggin.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. Meanwhile, Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Viacom has a Zacks Rank #3 and an Earnings ESP of +0.12%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are three stocks you may want to consider, as our model suggests that these have the right combination of elements to deliver a beat this earnings season.

Synopsis SNPS has an Earnings ESP of +1.15% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Electronic Arts EA has an Earnings ESP of +11.35% and a Zacks Rank #1.

Intuit INTU has an Earnings ESP of +0.59% and a Zacks Rank #2.

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