Viacom Inc. VIAB declared second-quarter fiscal 2015 financial results wherein the bottom line surpassed the Zacks Consensus Estimate while the top line missed. A weak foreign exchange rate resulted in the decline in revenues. Moreover, earnings were affected by higher restructuring charges as well as programming expenses.
Net loss from continuing operations in the reported quarter was $53 million or 13 cents per share compared with a net income of $502 million or $1.13 in the prior-year quarter. However, quarterly adjusted earnings per share of $1.16 outpaced the Zacks Consensus Estimate of $1.08.
Total revenue in the quarter stood at $3,078 million, down 3% year over year and also below the Zacks Consensus Estimate of $3,267 million. Quarterly operating income came in at $38 million, highlighting a decrease of 96% year over year. During the reported quarter, Viacom bought 10.9 million of common shares for $750 million.
At the end of the second quarter, Viacom had $306 million of cash & cash equivalents and $13,213 million in outstanding debt on its balance sheet compared with $1,000 million and $12,751, respectively, at the end of fiscal 2014. Meanwhile, the debt-to-capitalization ratio stood at 0.85 against 0.77 at the end of fiscal 2014.
Media Networks Segment
Quarterly revenues of $2,452 million inched up 3% year over year, mainly boosted by higher affiliated fees and advertising sales. Quarterly operating profit came in at $903 million, down 5% year over year. Annually, domestic and worldwide affiliate fee revenues grew 5% and 3%, respectively.
On the other hand, on a year-over-year basis, domestic advertising revenues fell 5% owing to weaker ratings. Meanwhile, worldwide advertising revenues improved 4% on the acquisition of British public service broadcaster Channel 5 Broadcasting Ltd.
Filmed Entertainment Segment
Quarterly revenues fell 21% year over year to $659 million, mainly because of 32% lower TV license fees and reduced revenues from the home entertainment business. Quarterly operating loss stood at $1 million, highlighting a 91% deterioration from the year-ago figure. On the other hand, Global Theatrical revenues decreased 10% while Worldwide Home Entertainment revenues declined 25% year over year.
Our Take
We believe that Viacom is well positioned for long-term growth as it continues to benefit from its predominant cable network-based business model, strong affiliate fee revenue growth, increased number of share repurchase plans, multi-platform content and its position as one of the fastest growing traditional ad media companies. Moreover, the acquisition of Channel 5 will continue to drive advertising revenues.
However, stiff competition from media companies like News Corp. NWSA, CBS Corp. CBS and Time Warner Inc. TWX along with spiraling programming expenses may act as headwinds going forward.
Currently, Viacom has a Zacks Rank #2 (Buy).
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