A month has gone by since the last earnings report for Viacom (VIAB). Shares have added about 2.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Viacom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Viacom Q2 Earnings Beat Estimates, Revenues Down Y/Y
Viacom reported second-quarter fiscal 2019 adjusted earnings of 95 cents per share that beat the Zacks Consensus Estimate by 13 cents. The figure increased 3% year over year on a constant-currency (cc) basis.
Revenues of $2.96 billion lagged the Zacks Consensus Estimate of $3.03 billion and decreased 4% year over year at cc.
Selling, general and administrative (SG&A) expenses decreased 3.6% to $743 million.
Adjusted operating income decreased 1% at cc from the year-ago quarter to $637 million.
Media Networks Details
Media Networks revenues were $2.27 billion, down 5% year over year at cc. Affiliate revenues decreased 4%, while advertising revenues declined 3%. Consumer Products, Recreation and Live Events (previously the Ancillary segment) revenues declined 17% at cc.
Domestic revenues were down 2% on a year-over-year basis to $1.82 billion. International revenues declined 13% at cc to $443 million.
Domestic advertising revenue growth rate improved, driven by 76% growth in Advanced Marketing Solutions (AMS) revenues that benefited from Pluto TV integration. Domestic affiliate revenues declined due to subscriber loss.
Viacom continues to hold the top share of basic U.S. cable viewing among the 2-49, 2-11, 12-17, 18-34 and African American demographics in the reported quarter.
MTV was the fastest growing network in primetime among the top 30 broadcast and cable networks. It gained share for the eighth straight quarter, up 5% year over year.
Comedy Central achieved its eighth consecutive quarter of share growth, up 12% year over year. Paramount Network share grew more than 3% year over year.
Channel 5 witnessed its third consecutive quarter of growth in viewership share. Telefe maintained the #1 position and grew share for the fourth straight quarter.
Viacom Digital Studios (VDS) continued to grow digital consumption. VDS watch time doubled year over year with almost 10 billion minutes viewed. Moreover, video views increased 69% in the quarter.
Awesomeness’ second-quarter releases included PEN15 on Hulu. The company produced Netflix film The Perfect Date, and upcoming series, Trinkets.
Filmed Entertainment Details
Filmed Entertainment revenues decreased 1% year over year to $730 million. Theatrical revenues of $172 million surged 244%, owing to better year-over-year box office collections from movies like Bumblebee and What Men Want.
Paramount’s film slate for the remainder of fiscal 2019 includes Rocketman and Dora and the Lost City of Gold.
Ancillary revenues jumped 75% to $89 million, primarily driven by a new music rights licensing agreement. Licensing revenues decreased 34% year over year to $315 million. Home entertainment revenues declined 6% year over year to $154 million, reflecting lower DVD and Blu-ray disc sales.
Other Q2 Highlights
The company inked a long-term deal with AT&T in March. The agreement includes broad carriage of Viacom brands on DirecTV and U-Verse. The company also gained carriage on AT&T’s DirecTV Now Plus and Max offerings. It also added MTV, Nick and TV Land to AT&T Watch.
Viacom was also added to fuboTV’s live TV streaming service and Charter Spectrum TV Essentials services. Moreover, the company signed a content distribution agreement for T-Mobile’s forthcoming mobile video service.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.11% due to these changes.
At this time, Viacom has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Viacom has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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