What To Expect From Viacom’s Q3 Earnings

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Viacom (NYSE:VIA) is scheduled to announce its third quarter fiscal 2017 results on Thursday, August 3. The company had a better-than-expected first half of fiscal 2017 (fiscal year ends September 2017) so far, with the company beating earnings per share estimates and revenue estimates in both quarters. In the first six months of 2017, the media company’s total revenue increased 7% year-over-year (y-0-y) to $6.6 billion, due to growth in both the Media Networks and Filmed Entertainment segments. The company’s top line growth was driven by 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, partially offset by weakness in advertising revenue.

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 among 18 to 49 viewers, broadcast and cable networks witnessed a decline of 12%, following an 8% decline in the March quarter. Viacom reportedly lost 2.4 million viewers (8%), which could impact the company’s advertising revenues in the third quarter.

Paramount Pictures collected almost $180 million at the U.S. box office during the June quarter, primarily led by the success of Transformers: The Last Knight and Baywatch. Moreover, the studio’s performance was fairly strong in this quarter as compared to the prior year quarter, which should boost studio revenue for the third quarter.

Q2 Guidance

For the June quarter, Viacom expects improvement in worldwide advertising sales, driven by ongoing double-digit growth in international business, offset by declines in domestic advertising in the low single-digits. In addition, the company also expects both domestic and international affiliate revenue to grow, with worldwide revenues showing sequential improvement from Q2.

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