Viacom warns on profit as advertising sales fall
NEW YORK |
NEW YORK (Reuters) - Viacom Inc VIAb.N, owner of MTV Networks and Paramount movie studio, warned third quarter earnings would fall at least 10 percent short of Wall Street estimates due to a decline in U.S. advertising sales.
The Friday warning drove shares of Viacom down nearly 20 percent and raised more concerns about the media industry's ability to weather the economic turmoil. Time Warner Inc (TWX.N) News Corp NWSa.N and CBS Corp (CBS.N) shares also fell sharply in a broadly weaker stock market.
"Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets," Viacom Chief Executive Officer Philippe Dauman said in a statement.
The Sumner Redstone-controlled media company has made no secret of the troubles caused by a slump in advertising spending as companies cut marketing budgets during deep economic downturns.
This summer, Viacom pointed to both retail and automotives categories in reporting weaker-than-expected second quarter sales at its cable television networks, and said at the time the short-term economic outlook was "difficult to predict."
But it appears that media companies and advertising experts may have misjudged the severity of the advertising pullback, even before the economic crisis worsened in recent weeks.
Now companies must contend with a 2009 advertising outlook that is already being quickly rethought.
Citigroup became the latest the mark down its advertising outlook in a research note issued on Friday, saying that the picture has "deteriorated markedly" for both 2008 and 2009. Wachovia Securities made a similar move earlier this week.
Viacom now expects to report on November 3 adjusted diluted earnings per share of 53 cents to 55 cents for the third quarter. That compares with the average analyst estimate of 61 cents a share, according to Reuters Estimates.
It saw a 3 percent drop in U.S. advertising revenue in the quarter. It said international advertising revenue, by contrast, rose about 8 percent. Overall, it said worldwide ad revenue dipped about 2 percent.
The company, which also owns Nickelodeon, scaled back its outlook for 2008, saying adjusted diluted earnings per share from continuing operations would rise in the "mid-single to low-double digit" range from the prior year, when it earned $2.36 per share. Viacom had previously said it expected to deliver low double-digit annual growth in earnings for the period from 2008 to 2010.
Analysts had been expecting the company to post a nearly 11 percent rise in full-year earnings to $2.61 a share, according to Reuters Estimates.
Viacom shares were down $3.95, or 19.72 percent, at $16.12 on the New York Stock Exchange in afternoon trading. Shares of CBS, also controlled by Redstone, were down 11.1 percent at $9.01, while Time Warner shares were down 11.4 percent at $8.94 and News Corp shares were down 8.2 percent at $8.27.
(Reporting by Paul Thomasch, editing by Gerald E. McCormick; Editing by Andre Grenon)
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