Viacom Inc. (VIA.B) declared blockbuster financial results in the fourth quarter of 2011. In synergy with such strong performance, the company increased its share repurchase authorization from $4 billion to $10 billion.
Quarterly net income from continuing operation was $576 million or $1.00 per share in the reported quarter compared with $488 million or 80 cents per share in the prior-year quarter. However, adjusted (excluding debt extinguishment cost) EPS of $1.06 was ahead of the Zacks Consensus Estimate of $1.02.
Quarterly total revenue was $4,053 million, up 22% year over year, and beat the Zacks Consensus Estimate of $3,742 million. The significant upside in revenue was mainly attributable to the strong performance of Filmed Entertainment and Media Networks segments. Quarterly operating income was $929 million, which increased 11% year over year.
During the reported quarter, Viacom bought 19.7 million common shares worth $900 million. At the end of the fiscal 2011, Viacom had $1,021 million in cash & cash equivalent and $7,342 million of outstanding debt on its balance sheet compared with cash & cash equivalent of $837 million and outstanding debt of $6,721 at the end of fiscal 2010. Debt-to-capitalization ratio at the end of the reported quarter was 0.46 compared with 0.42 at the end of fiscal 2010.
Media Networks Segment
Quarterly revenue of $2,292 million increased 8% year over year. This was mainly driven by solid growth in affiliate fees and advertising sales. Worldwide affiliate revenues climbed 11% in the reported quarter.
Both domestic and worldwide advertising revenue jumped 7% year over year. Worldwide Ancillary revenue dipped 3% year over year. Quarterly operating profit was $870 million, up 1% year over year.
Filmed Entertainment Segment
Quarterly revenue surged 46% year over year to $1,793 million mainly riding on the huge success of the movie Transformers: Dark of the Moon and higher home entertainment sales. Worldwide home entertainment revenue increased 26% year over year. Theatrical revenue increased by a whopping 107% year over year while ancillary revenue expanded 49% year over year. Television license fees rose 5% annually.
Quarterly operating profit skyrocketed 158% year over year to $129 million, mainly on the back of strong box office collection of the movie Transformers: Dark of the Moon.
Recommendation
Viacom is well positioned for long-term growth as it continues to benefit from its predominately cable networks-based business model: strong affiliate fee revenue growth, global brands, multi-platform content and a continuous share repurchase plan.
However, stiff competitions fromother media companies like News Corp. (NWSA) and Time Warner Inc. (TWX) as well as increased programming expense may act as headwinds for the stock going forward.
We, thus, maintain our long-term Neutral recommendation for Viacom. Currently, Viacom has a Zacks #3 Rank, implying a short-term Hold rating.
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