Viacom reports lower fiscal 2nd-quarter net income but beats expectations, shares rise

NEW YORK, N.Y. – Viacom Inc. posted an 18 per cent drop in second-quarter net income due to lower revenue, especially from the filmed entertainment division that includes Paramount Pictures. But a faster-than-expected recovery in advertising revenue at its TV networks sent shares to a record high Wednesday.

The results faced a tough comparison to last year, when Viacom was raking in proceeds from “Mission Impossible — Ghost Protocol.” The company, which owns MTV, Comedy Central and other TV networks, actually surpassed Wall Street’s profit expectations and saw a rebound in advertising revenue. Its shares rose nearly 3 per cent in morning trading after briefly hitting an all-time high.

Concern about Viacom’s television audience ratings have largely faded as the company has added new programming and built on existing shows such as MTV’s “Catfish” and “Teen Mom.” That translates to an advertising revenue rebound and year-over-year growth, said Philippe Dauman, Viacom’s president and CEO.

Advertising revenue grew 2 per cent as they benefited from ratings improvements at some of the company’s networks, compared with a 6 per cent decline in the first quarter.

Dauman said further improvement in advertising revenue growth is expected for the current fiscal quarter compared with the numbers Viacom just put up.

Morgan Stanley analyst Benjamin Swinburne said the return to growth happened earlier than expected and was likely driven by improvement in Nickelodeon ratings and stronger demand among key advertising markets for the company’s cable networks.

Viacom reported earnings of $478 million, or 96 cents per share, in the January-March period. That’s down from $585 million, or $1.07 per share, in the same period a year earlier.

Revenue fell 6 per cent to $3.14 billion from $3.33 billion. Analysts had expected earnings of 95 cents per share on overall revenue of $3.18 billion, according to a poll by FactSet.

Viacom Inc., based in New York, owns MTV, VH1, Comedy Central and other TV networks.

Revenue from the media networks division grew 2 per cent to $2.23 billion thanks to more robust advertising and affiliate revenue. Revenue at the Paramount filmed entertainment business dropped 20 per cent to $971 million, from $1.17 billion.

Viacom faces the expiration of its licensing relationship with Netflix Inc. at the end of this month. Netflix has been paying Viacom for the right to show a broad range of its programming from channels like Nickelodeon, BET and MTV to its streaming customers. The company is now looking to license individual shows only.

In a conference call with analysts, Dauman said Viacom is in “constructive discussions with several parties, including Netflix” on licensing deals to distribute its content beyond the expiration if the Netflix deal.

“We continue to see such distribution to be a growing and complimentary avenue for our affiliate business,” he said.

After results came out, Viacom’s more heavily traded Class B shares rose $1.91, or 3 per cent, to close Wednesday at $65.90, after earlier hitting an all-time high of $69.08. Viacom’s stock began trading in its current form in late 2005, just before CBS Corp. separated into its own company.