Viacom (VIA) Beats The Street in Q3 (Update)

November 3, 2009 8:53 AM EST

(Update with comments from analysts)

Media-giant Viacom (NYSE: VIA) (NYSE: VIA.B) reported a third-quarter adjusted earnings per share of 69 cents, 12 cents better than the analyst consensus of 57 cents. Revenues fell 3 percent from the year-ago quarter to $3.317 billion, in line with the consensus of $3.3 billion.

The company came in with a third-quarter profit of $463 billion, up from the $401 million in the same quarter last year.

Sumner M. Redstone, Executive Chairman of Viacom, said, "As we enter a period of economic recovery, Viacom is already beginning to reap the benefits of a highly focused and well executed strategy. With our strong brands and growing global footprint, we are well positioned to capitalize on future opportunities."

The 3 percent drop in revenue from the same quarter last year was due primarily to lower home entertainment and advertising sales, which offset the growth in affiliate sales and theatrical revenues.

The operating income grew over the third quarter by 14 percent, driven by an $88 million increase in the Filmed segment.

The strong quarter was bolstered by the summer movie release of two of the company’s largest franchises, Transformers: Revenge of the Fallen and G.I. Joe: The Rise of Cobra. Both movies were widely successful, taking in over $550 million in combined revenue.

Viacom is currently trading at $31 per share before the market opens today, above yesterday's close of $29.77.


Analyst Comments:
Goldman Sachs is maintaining a Buy rating and a price target of $34 after the reported third-quarter results for the company. The modest improvements in ad revenues and the significant improvement in margins have the analysts keying in on the shares of Viacom. Ad revenues improved over the second quarter form a 6 percent decline to a 4 percent decline. Also the stronger than expected sales of Beatles Rock Band gave the company a boost in revenue for the quarter.

Deutsche Bank notes that the cost savings programs that Viacom has implemented have taken more of an effect in the third quarter. Along with strong DVD sales of the first Transformers movie on the back of the sequel boosted revenue. The high margins on the popular Paranormal Activity, a low-budget horror movie that became the most profitable movie off all-time due to a minuscule production budget, also should help the company continue to see growth in the current quarter. Deutsche Bank analysts are maintaining a Hold rating along with a $28 price target.

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