Viacom Beats Lowered Financial Expectations
At the top of a conference call with analysts, CEO Philippe Dauman noted the "controversy related to governance" at Viacom and spoke of a "potential partnership" for Paramount.
Weighed down by falling ad sales at its domestic cable networks and the under-performance of Teenage Mutant Ninja Turtles: Out of the Shadows, Viacom reported 27 percent less quarterly profit than it did a year ago but managed to beat Wall Street's expectations.
The entertainment conglomerate, run by embattled CEO Philippe Dauman, said Thursday that it earned $432 million in the most recent quarter, or $1.09 per share, while analysts had predicted $1.01 per share. Revenue of $3 billion was up 2 percent year over year.
Viacom had previously warned that its profit would be down for the quarter, offering guidance that it would earn up to $1.05 per share. The 4-cent beat, therefore, was interpreted as good news, and the stock was rising 1 percent in pre-market trading.
While revenue at Viacom's media networks segment sunk only 3 percent in the most recent quarter to $2.5 billion, operating income was hammered for 22 percent to $872 million as programming and marketing expenses rose.
Dauman was nevertheless upbeat about the trend he sees for the cable channels, noting ratings increases at Nickelodeon, Nick at Nite, VH1 and TV Land, as well as double-digit revenue growth for its international networks.
The filmed entertainment segment saw revenue surge 30 percent to $621 million, though it showed an operating loss of $26 million compared to operating income of $48 million a year earlier.
At the top of a conference call with analysts, Dauman noted the "controversy related to governance" at Viacom, where he and others are trying to prove ailing chairman emeritus Sumner Redstone isn't fit to make decisions about the company he built.
He said trials set for October are "positive steps that move us ahead to resolution" and that he would have no more to say about the matter during the conference call. Later, though, he acknowledged the power struggle is "somewhat of a distraction."
He also spoke of a "potential partnership" for Paramount," but Dauman's plan to sell a 49 percent stake in the film studio is one of the many things contested by Redstone and his allies, including daughter and board member Shari Redstone.
Dauman said Viacom has narrowed Paramount suitors down to "a handful of prospects," and he expressed confidence that the courts would allow a partial sale of the studio over the objections of Sumner and Shari Redstone and those loyal to them.
Of Paramount's quarterly performance, Dauman said: "There is no question the studio has had a rough go at the box office recently. But as they always do, we expect fortunes to turn."
One reason for the optimism, he said, is that Paramount television production is thriving, and it is "a business that did not exist a few years ago." Nevertheless, Paramount will record a loss for the year.
Dauman praised Star Trek Beyond, a hit movie still rolling out worldwide, and said he's excited about the Ben Hur remake due Aug. 19, "and, coming in the first quarter of 2017, Jack Reacher: Never Go Back starring Tom Cruise." The Jack Reacher sequel will open on Oct. 21, but revenues for the film will be captured in the 2017 fiscal period given that Viacom's new fiscal year begins Oct. 1.