Viacom, the owner of Paramount Pictures and such cable networks as MTV, Nickelodeon, Comedy Central and BET, on Thursday reported better-than-expected fiscal third-quarter earnings.
The company, led by CEO Bob Bakish, posted adjusted earnings from continuing operations of $475 million, or $1.18 per share, compared with $471 million, or $1.17 per share, in the year-ago period. Wall Street had on average projected earnings of $1.07 a share.
The company’s results benefited from cost cutting as selling, general and administrative expenses dropped, while programming spending was up. The lower costs helped offset a 4 percent revenue drop in the quarter to $3.2 billion.
“Viacom produced another quarter of strong progress, with clear evidence that our turnaround is delivering results and that our evolution into a truly global, multiplatform, brand- and IP-driven entertainment company is well underway,” Bakish said. “Paramount Pictures is revitalized, with outstanding box office performance and growing television production revenues driving substantial gains in profitability. Our media networks brands posted significant gains in both linear flagship share and digital consumption, in addition to sequential improvements in domestic affiliate revenue growth.”
He also said Viacom “concluded a strong advertising upfront that combined robust price increases, as well as improved packaging that included increased demand for our advanced marketing solutions.” Additionally, the company “continued to diversify our business with growth in worldwide live event attendance and the expansion of a cross-company studio production initiative that leverages our sizable creative assets and global capabilities to drive incremental opportunities,” the CEO highlighted.
Concluded Bakish: “We remain focused on building this momentum with an even stronger September quarter as we continue to position Viacom for the future.”
Film unit operating profit rose to $44 million in the latest quarter from $9 million in the year-ago period even though film revenue was down 9 percent from the same period last year, which had benefited from the international performance of Transformers: The Last Knight. The company lauded the “strong performance of current-quarter releases A Quiet Place and Book Club,” lower operating expenses, as well as a 35 percent increase in licensing revenue “primarily due to the release of Paramount Television product, including the second season of 13 Reasons Why.”
Concluded Viacom: “Paramount Pictures is delivering on its turnaround, with strong current-quarter releases driving domestic theatrical revenues up 58 percent, continuing growth in television production and increasing profitability.” Analysts had in recent weeks increased their film unit earnings forecasts on the success of A Quiet Place and Book Club, which both had small budgets but performed well.
But analysts had also reduced their estimates for the media networks division amid weaker Nickelodeon ratings and pressure on the currency of Argentina where the company owns big network Telefe. Most analysts expected a 2 to 3 percent U.S. advertising revenue drop in the company’s TV networks division for the latest quarter. On the positive side, affiliate fees have come in ahead of Wall Street expectations, and MTV and other networks have posted improved ratings.
Viacom’s latest quarterly results showed an 8 percent TV networks unit drop in adjusted operating income to $799 million driven by a 2 percent revenue decline. Worldwide advertising revenue fell 4 percent, with a 3 percent U.S. drop and a 4 percent international decline, while affiliate revenue was down 3 percent.
Discussing U.S. ad results, Viacom highlighted that they were “reflecting lower linear impressions, partially offset by higher pricing and growth in Advanced Marketing Solutions revenues.”
Overall, Viacom said that its Media Networks unit “increased its momentum with growth in television share, significant gains in digital consumption and live event attendance, sequential improvement in domestic affiliate revenue growth and savings from cost transformation initiatives.”
Viacom recently agreed to acquire youth media company Awesomeness for $25 million, add to a growing roster of digital brands.
On the earnings call, analysts will look for latest commentary from Bakish on his team’s efforts to turn around Paramount and the broader Viacom business. They will also look for any body language on what the recent report in The New Yorker about sexual misconduct allegations against Leslie Moonves, the CEO of sibling company CBS Corp., could mean. Some have suggested that Viacom and CBS controlling shareholder National Amusements, led by Shari Redstone, which remains engaged in a legal showdown with CBS, could renew its push for a recombination of the two companies.
Pivotal Research Group analyst Brian Wieser recently slightly lowered his price targets on the shares of Viacom and CBS. “CBS remains a ‘hold’-rated stock, but as Viacom stock has fallen to a point that is 15 percent below our current price target, and further considering the advantage we expect Viacom to realize in a [potential] recombination, we upgrade Viacom from ‘hold’ to ‘buy’ at this time,” he said.
This article was originally published by The Hollywood Reporter.