What To Watch For In Viacom’s Q4

by Trefis Team
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Viacom (NYSE:VIA) is scheduled to announce its fourth quarter fiscal 2017 results on Thursday, November 16. The company announced mixed Q3 results, as its earnings per share came in ahead of market expectations but revenues missed. In Q3, Viacom’s total revenue increased 8% year-over-year (y-o-y) to $3.3 billion, due to growth in both the Media Networks and Filmed Entertainment segments. The company’s top line growth was driven by growth in advertising and affiliate revenues at the Media Networks business, along with robust growth in theatrical revenues due to a stronger film slate at Paramount studio. Viacom also posted adjusted earnings of $1.17 per share, up 11% year-on-year.

Our $41 price estimate for Viacom’s stock is more than 30% ahead of the current market price.

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. According to Nielson data, MTV’s primetime ratings (for an audience aged 18 t0 34 years) saw a 31% spike in August. This growth was helped by its new reality show Siesta Key. In fact, MTV saw the first three months of consecutive ratings improvement year over year in six years, from June to August. This could boost the company’s advertising revenues in the fiscal fourth quarter. Almost 80% of the company’s revenue comes from the Media Networks segment. Per our estimates, MTV represents 9% of the company’s value.

In addition, we also expect a fairly weak quarter for the company with respect to Paramount Pictures. The studio’s performance was soft in the fourth quarter compared to the prior year period, due to an absence of major film releases in the quarter. This could impact the studio revenue for the September quarter.

Q4 Guidance

For the September quarter, Viacom expects improvement in worldwide advertising sales, driven by ongoing double-digit growth in international business, partially offset by a decline in its domestic business. In addition, the company expects its domestic affiliate revenues to decline in the low single digits in this quarter. Reuters’ compiled analyst estimates forecast revenues of $3.2 billion and earnings of 72 cents per share in Q4.

For the full year, Viacom expects the growth rate for Media Networks’ programming spends to be in the low to mid-single-digits, including the impact of the acquisition from Telefe, partially offset by benefits from its restructuring actions.

Have more questions on Viacom? Please refer to our complete analysis for Viacom

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