What To Expect From Viacom’s Q2 Earnings

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Viacom (NYSE:VIA) is scheduled to announce its second quarter fiscal 2017 results on Thursday, May 4. The company started fiscal 2017 on a strong note, as both its earnings per share and revenue came in ahead of expectations in the first quarter. Viacom’s fiscal first quarter revenue came in at $3.3 billion, up 5% from a year ago, on the back of an increase in affiliate revenue and strength in the company’s international operations in Media Networks, along with a stronger film slate at Paramount studio. Viacom also reported adjusted operating income of $706 million, down 16% y-o-y, along with adjusted earnings of $1.04 per share, which decreased 12% y-o-y.

In the upcoming earnings, Viacom’s results will primarily be driven by its Media Network performance. Viacom has significant exposure to its media networks and relies heavily on television ratings. Looking at TV network groups as a whole in C3 prime-time viewing, Viacom was flat in the second quarter. [1]

According to MediaPost, overall Nielsen C3 ratings for all cable networks declined 7% in the second quarter, due to emergence of alternate viewing platforms. In fact, all non-kids cable TV C3 audiences declined 3% in the quarter ending March, due to a shift in audience preferences to news channels, which were driven by the political season. Going forward, we expect the company to see pressure on its media networks in the second quarter, which yet again saw soft ratings. For Viacom, it has become immensely important to invest more into original programming, which can bring in some ratings growth and provide a stable outlook.

Paramount Pictures collected $166 million at the U.S. box office during the March quarter, primarily led by the success of xXx: The Return of Xander Cage and continued benefits of Arrival. However, the studio’s performance was relatively weak in this quarter as compared to the prior year quarter, which would impact the studio revenue in the second quarter.

Future Outlook

In Q2 fiscal 2017, Viacom expects low single-digit revenue growth in its domestic affiliate revenues. For the full year 2017, the company expects Media Networks SG&A expenses to grow in mid single digits.

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Notes:
  1. Television, Cable Viewing Down In Q1, InsideRadio, Apr 22 2017 []
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