AMC Networks Earnings Rise, Miss Estimates as ‘Walking Dead’ Boosts Ad Revenue

AMC Networks on Thursday reported improved first-quarter earnings as original shows helped boost advertising revenue, but the results came in below Wall Street estimates due to higher costs.

The owner of cable channels AMC, IFC, WE tv and Sundance Channel, also posted a revenue gain driven by higher U.S. ad revenue, helped by strong ratings for the fourth season of AMC hit show The Walking Dead. 

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Quarterly earnings from continuing operations of $72 million compared with $62 million in the year-ago period, below analysts’ average expectation amid higher programming and promotional costs. Costs tied to a recent acquisition were also a drag on results. Operating profit rose 15.8 percent to $148 million.

Revenue jumped 37.3 percent to $525 million driven by a 20.7 percent gain at the company’s U.S. networks arm. The unit’s ad revenue grew 26.8 percent, with the company citing “strong demand for our original programming, primarily at AMC.”

ISI Media analyst David Joyce downgraded his rating on the stock after the earnings report, saying: “Despite the stronger-than-expected advertising growth, the lack of visibility on expense growth continues to concern investors.”

The company has been expanding its lineup of original series, with The Walking Dead a particular hit. In the current quarter, AMC saw the return of Mad Men. In the summer, the company will see the return of Hell on Wheels.

But not all originals have been big hits. AMC Networks, led by CEO Josh Sapan, had in the previous quarter taken write-offs for crime drama Low Winter Sun, which AMC late last year canceled amid weak ratings for its first season, and The Killing, which was canceled after three seasons.

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The first quarter marked the first quarter that included the performance of Chellomedia, the international networks business that AMC recently acquired from John Malone‘s Liberty Global.

Its inclusion boosted the international unit’s revenue, but also widened its operating loss due to higher depreciation and amortization expenses. 

“AMC Networks continued to build momentum in the first quarter of 2014, with double digit increases in revenue” and adjusted operating cash flow, said Sapan. “At our national networks, our original programming performed well, driving attention for and strengthening our network brands, with series including IFC’s Spoils of Babylon, SundanceTV’s The Red Road, WE tv’s SWV: Reunited and AMC’s The Walking Dead, which grew 24 percent in total viewers for its fourth season and remains the highest-rated show on television among the most coveted demographic.”

Added Sapan: “Having completed our acquisition of Chellomedia, we are quickly integrating those networks and are streamlining our operations. We view our now-robust international platform as a springboard for additional growth for the company in the years ahead as we continue to focus on creating and delivering maximum value for our shareholders.”

E-mail: Georg.Szalai@THR.com

Twitter: @georgszalai

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