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Viacom (VIAB) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Viacom VIAB is slated to report fourth-quarter fiscal 2019 results on Nov 14.

The Zacks Consensus Estimate for fourth-quarter earnings has increased by 3 cents to 79 cents over the past 30 days, indicating a decline of 16.8% from the year-ago quarter's reported figure.

The consensus mark for sales is pegged at $3.44 billion, suggesting a decline of 1.3% from the figure reported in the year-ago quarter.

In the last reported quarter, adjusted earnings of $1.20 per share beat the Zacks Consensus Estimate by 16.5%. The figure increased 3% year over year on a constant-currency (cc) basis.

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

Notably, the company’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 11.49%.

Let’s see how things have shaped up prior to this announcement.

Viacom Inc. Price and EPS Surprise

Viacom Inc. Price and EPS Surprise

Viacom Inc. price-eps-surprise | Viacom Inc. Quote

Factors to Watch

The turnaround of Paramount is expected to have continued to benefit Viacom in the fourth quarter. The company is likely to have benefited from the usage of its iconic IP to rekindle interest in popular franchises and drive audience engagement at the theater, the network and at retail through consumer products.

Crawl was released by the division during the to-be-reported quarter. Per Box Office Mojo data, Crawl’s total gross collection was $90.5 million compared with a production budget of $16 million.

Dora and the Lost City of Gold, a live action film from Nickelodeon's Dora the Explorer franchise was also released during the fourth quarter that generated total gross collection of $116.6 million, per Box office Mojo data.

Rocketman, another movie released by the division in the last reported quarter, collected $195.2 million (as of Aug 23) compared with a production budget of $40 million.

Other studios like Awesomeness are also expected to have benefited in the fourth quarter with contributions from releases like season two of Hulu's Light as A Feather in July and Trinkets, released on Netflix at the end of the last reported quarter.

These are expected to have driven Viacom’s top line and operating income in the fiscal fourth quarter.

Additionally, higher investments in original content and focus on providing quality entertainment are expected to have driven audiences for Viacom’s flagship brands like MTV, BET and Comedy Central.

Furthermore, Nickelodeon unveiled certain shows that might have had a positive impact on viewer engagement in the to-be-reported quarter.

During the fiscal fourth quarter, Nickelodeon released Henry Danger The Musical, which features 26 original Broadway-style songs. With 117 episodes till July, Henry Danger is the network’s longest-running live-action sitcom.

Shows such as Ryan's Mystery Play Date on preschool TV and new series like Are You Smarter Than 5th Grader are expected to have attracted new audiences. These shows are expected to have driven share gains at Nick for the first few weeks in the fourth quarter.

Later in the quarter, BET Networks and Tyler Perry Studios launched BET+, a premier subscription video-on-demand service targeting the African American audience. The app was launched on the App Store for iPhone and iPad, Android devices, Android TV devices, Amazon Fire TV and Prime Video Channels, which is expected to have expanded Viacom’s presence and subscription growth in this audience group.

Moreover, Pluto TV, which 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, is expected to have been a key catalyst.

As of the end of July, Pluto had 18 million monthly active users (MAUs) compared to 12 million reported in January. The growth in MAUs is expected to have benefited from expansion in content offering and broadened distribution, which is expected to have further driven ad sales in the fourth quarter.

Further, Viacom increased Pluto TVs content offering by adding 28 new channels to the service during the quarter. The company also launched Pluto TV Latino, a suite of 11 free linear channels stock with 2,000 plus hours of TV programming in Spanish and Portuguese.

Pluto TV’s availability on Comcast’s Xfinity X1 and new distribution on Cox Communications' Contour video and broadband platforms might have had a positive impact on the company’s top line in fourth-quarter fiscal 2019.

Further, anticipated growth in domestic ad sales is expected to have driven strength in Media Networks and filmed entertainment in the fourth quarter.

Key Developments in Q4

On Aug 13, Viacom and CBS announced that they have entered a definitive agreement for an all-stock merger, creating a combined company with more than $28 billion in revenues. The combined company, ViacomCBS Inc., will be led by Bob Bakish, the current president and CEO of Viacom.

What Our Model Says

According to the Zacks model, the combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of an earnings beat.

Viacom has a Zacks Rank #3 and an Earnings ESP of +13.38%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With the Favorable Combination

Here are some companies, which, per our model, also have the right combination of elements to post an earnings beat this quarter:

Twin River Worldwide TRWH has an Earnings ESP of +13.25% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Momo MOMO has an Earnings ESP of +3.94% and a Zacks Rank #3.

International Game Technology IGT has an Earnings ESP of +20.00% and a Zacks Rank #3.

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