Viacom Quarterly Financials Decline

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UPDATED: The company missed analyst expectations. Ad revenue was off from 2011.

Viacom reported declines in adjusted earnings and revenue in the last quarter.

In the 3rd quarter, Viacom said that adjusted net earnings from continuing operations declined 12 percent to $512 million. The New-York based company also reported that revenue had decreased 14 percent to $3.24 billion.

The results were short of analyst expectations.

Viacom attributed the declines to its Filmed Entertainment titles as well as lower advertising revenues. The company also noted that in the same quarter in 2011, the company had benefited from major films, big television event programming, and digital distribution agreements.

The soft earnings come weeks after Viacom resolved a high-profile dispute with DirecTV that temporarily caused the blackout of Nickelodeon and other channels. Ratings at some of the company's channels such as MTV have been down of late.

"Despite challenging year-on-year comparisons with last year's strong third quarter, Viacom remains committed to pursuing its long-term strategy of international expansion, continued programming investment and ongoing focus on operational discipline," said Viacom CEO Philippe Dauman. "Looking forward, we will continue to operate efficiently to maintain our competitive and creative edge, and over time, return significant value to shareholders."

Analysts had been expecting around $3.49 billion in revenue for the 3rd quarter. Adjusted diluted earnings per share of $0.97 also came in about three cents lower than anticipated by most analysts.

Ad revenue has been one soft spot for Viacom. Domestically, it decreased 7 percent. Internationally, ad revenue declined 9 percent. Both numbers were far below what Wall Street had pegged Viacom to report. For example, Citi analyst Jason Bazinet projected total ad revenue to decline 4 percent and also thought that ad revenue declines in the U.S. would be worse than the worldwide results. Instead, it was much worse with ad sales off the most since 2009.

As for affiliate revenue, Viacom reported that it was down 1 percent domestically, although noted that it was impacted by digital distribution arrangements reported in the same quarter in the prior year. Excluding that, Viacom said that the growth rate would be in the high-single digits.

Most analysts agree that Viacom had resolved its rate negotiations with DirecTV on favorable terms with an increased rate at more than 20 percent, signaling hope for bargaining raises in other deals.

On a conference call with analysts after the earnings report, Dauman said that some of the recent network ratings woes were the result of "cyclical" factors and expressed confidence that there would be a comeback. He said Viacom has been focusing on enhancing programming talent and that the "magnitude of programs coming leads us to believe there will be improvements."

Dauman also spoke about a strong recent ad upfront performance, particularly at Nickelodeon, which despite ratings troubles, experienced a "good performance" at the kids upfronts. Overall, the company says that revenue from the upfronts is up with mid-digit growth in pricing.

At the start of the analyst call, Viacom chairman Sumner Redstone gave Dauman a vote of confidence, expressing optimism about the future of the company and saying its chief executive was a "great warrior" for the way he handled the DirecTV negotiations.

"In the long run, Philippe will win," said Redstone.

Asked whether there were management changes in store for the future, Dauman answered that the company had great leaders, but acknowledged that the company had recently made a lot of changes in the programming departments across several of the networks.

"We have a culture of accountability and have been implementing it at different layers at the company," he said.