Viacom (VIAB) Down 10.2% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Viacom (VIAB). Shares have lost about 10.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Viacom’s Q4 Results Benefit from Paramount Turnaround

Viacom reported fourth-quarter fiscal 2018 adjusted earnings of 99 cents per share that beat the Zacks Consensus Estimate by 4 cents and increased 29% year over year.

Revenues of $3.49 billion beat the Zacks Consensus Estimate of $3.34 billion and increased 5% year over year.

Adjusted operating income surged 16% from the year-ago quarter to $670 million.

Filmed Entertainment Details

Filmed Entertainment revenues increased 25% year over year to $984 million. Theatrical revenues of $337 million surged 193%, owing to robust box office collections of Mission: Impossible – Fallout. Licensing revenues increased 3% year over year to $337 million.

However, Home entertainment revenues declined 17% year over year to $157 million, reflecting unfavorable mix and lower number of titles in release. Ancillary revenues also decreased 10% to $55 million.

Paramount’s Mission: Impossible – Fallout was #1 at the global box office in the fourth quarter. Viacom stated that it is the most successful film of the franchise and has collected almost $800 million since its release.

Viacom stated that A Quiet Place has so far earned more than $340 million globally. Moreover, released in May, Book Club has earned more than $75 million to date at the box office.
 
Paramount has a strong slate of releases in fiscal 2019, 13 titles compared with nine in fiscal 2018, which includes Bumblebee, What Men Want, Wonder Park, Pet Sematary and Rocketman.

Paramount Television premiered Tom Clancy’s Jack Ryan on Amazon and Maniac on Netflix in the fourth quarter.

Paramount Television has 16 series ordered for production. Of these nine are new shows, including The Haunting of Hill House for Netflix, Catch-22 for Hulu and First Wives Club for Paramount Network.

The returning shows include third seasons of 13 Reasons Why for Netflix and Berlin Station for EPIX, and second seasons of Tom Clancy’s Jack Ryan for Amazon and The Alienist for TNT.

Paramount Television revenues are expected to grow more than 50% in fiscal 2019.

Media Networks Details

Media Networks revenues were $2.52 billion, down 1% year over year. Affiliate revenues increased 4%, while advertising revenues declined 6%. Ancillary revenues were $181 million in the quarter.

Viacom continues to hold the top share of basic U.S. cable viewing among key demographics in the fourth quarter, driven by MTV, BET and Comedy Central.

Management stated that season two of MTV’s “Jersey Shore: Family Vacation was the most-watched unscripted show on cable in the demo.” Moreover, dedicated channel launch for hit franchises, including MTV’s Wild ‘N Out, helped Viacom double its YouTube subscriber base in fiscal 2018.

The company stated that production of Nickelodeon’s live-action series of Avatar: The Last Airbender for Netflix will start in 2019. Further, MTV Studios announced a three-season deal with Facebook’s Watch in October to “reimagine MTV’s The Real World for global audiences.”

Additionally, 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.

Through VIS, Viacom is now a leading global producer of original Spanish-language content, with more than 700 hours delivered in fiscal 2018.

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 -9.61% due to these changes.

VGM Scores

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.

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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