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Viacom's Quarterly Profit, Stock Soar

Jersey Shore
Courtesy of MTV Networks

The company's shares cross the $50 mark after the film division exceeded Wall Street expectations and swung to an operating profit, while the TV networks unit once again benefited from hit shows, such as "Jersey Shore."

NEW YORK - Viacom shares rose sharply on Thursday after the entertainment company reported double-digit gains in key financials for its fiscal second quarter that exceeded Wall Street expectations as the company’s cable TV networks segment continued to grow and its film segment swung to an operating profit.

Viacom shares in early trading crossed the $50 mark and hit $51 - a new high since the split from CBS Corp. at the start of 2006. At the end of the day, the stock was up 3.6 percent at $50.63.

Operating profit at the film unit amounted to $39 million, reversing a year-ago loss of $83 million, with management predicting further film margin improvements in the future. Many analysts had expected a film loss for the latest period. Media networks operating income rose 13 percent to $806 million amid continued ratings strength thanks to hit shows, such as Jersey Shore, and rising advertising revenue.

The entertainment company also said that premium TV service Epix, a joint venture of Viacom, MGM and Lionsgate, brought in another profitable quarter. Viacom recorded $15 million in equity income from companies, in which it is an investor, compared to a year-ago loss of $28 million. Management said the improvement was "due primarily to the profitable performance of Epix."

"Every part of Viacom is in great shape," president and CEO Philippe Dauman said on a conference call.

Several analysts said they would review their financial estimates for Viacom's full fiscal year after the stronger-than-expected results.

Viacom on Thursday posted a quarterly profit from continuing operations of $376 million, up 47 percent compared with $255 million in the year-ago period, or $245 million when including discontinued operations. The company previously sold video game maker Harmonix.

Adjusted earnings amounted to $430 million, up 69 percent. The adjusted results exclude a pre-tax debt extinguishment loss of $87 million on the buyback of debt.

Revenue for the latest period amounted to $3.27 billion, up 20 percent over the year-ago quarter.

U.S. advertising revenue at the company's cable networks rose 11 percent, once again accelerating growth momentum over the previous quarter - the fifth consecutive quarter of such sequential improvement. Management on Thursday predicted a further improvement in the current quarter.

Overall, media networks revenue also increased 11 percent to $2.1 billion, while film revenue jumped 38 percent to $1.2 billion.

The TV segment benefited from the continued success of such hit shows as MTV's Jersey Shore, BET's The Game and Comedy Central's Tosh.0. BET had its strongest quarter ever, management said. 

In the film unit, revenue rose amid an increase in home entertainment titles and such theatrical fare as Rango, Justin Bieber: Never Say Never and titles that carried over from 2010m such as True Grit and The Fighter. The bottom line in the film unit was boosted by higher home entertainment and TV license fee income, according to the company.

Dauman on Thursday's call reiterated that the company is well positioned for the upfront advertising market, saying his team is looking for "significant" increases in ad rates and sales volume in this year's upfront. Last year, the initial success of hit shows came too late to allow the company to translate them into big upfront gains, he said.

Meanwhile, the kids is underway and "robust," said Dauman who cited strong interest from toy and auto companies, among others. He said the company has already sold "substantially more" ad volume in this year's kids upfront market.

The CEO reiterated that he expects Viacom to strike additional digital distribution deals this year as it has done with Netflix and Hulu.

Dauman said his team currently continues to focus on boosting ratings at VH1 and Spike TV, lauding the "solid" ratings debut of VH1's Mob Wives and saying several new projects will follow. He said overall he is "pleased" with the networks' progress.

He also said that Viacom's board will consider an increase in the company's quarterly dividend at an upcoming meeting, with an increase expected to kick in this summer.

"Viacom's proven creative firepower and disciplined financial management are fueling our profitability and allowing us to deliver increasing value to our shareholders," said executive chairman and controlling shareholder Sumner Redstone about the latest quarterly results. On the conference call, he lauded the "truly outstanding results."

As he has done in the past, Redstone gave Dauman a complimentary introduction on the call. This time, he lauded Dauman as his "very good friend" and "one of the wisest men I have ever known."

 

Email: Georg.Szalai@thr.com

Twitter: @georgszalai