Viacom profit hit by weak advertising sales
(Reuters) - Viacom Inc (VIAB.O) posted a lower quarterly profit on Thursday due to weaker than expected advertising sales at its stable of cable networks, including MTV and Nickelodeon.
Viacom shares dropped initially by around 4 percent in early trading before recovering as Viacom executives assured investors they had seen a recovery in the market during the current quarter.
The media company said advertising revenue fell 3 percent in its fiscal first quarter, surprising analysts at Evercore Partners.
"We had forecast a 2 percent rise in advertising revenue, even though we knew of issues such as the Nickelodeon ratings measurement problem," said Alan Gould, an analyst at Evercore Partners.
Nickelodeon, a network aimed at children, suffered an unexpected drop in ratings during the crucial holiday quarter. Viacom said it was a Nielsen ratings measurement discrepancy that it would try to resolve. The lower ratings hurt advertising revenue.
Gould said Viacom's advertising weakness was likely to be company-specific rather than a wider media company trend.
Chief Executive Philippe Dauman assured investors that the company is already seeing improvement in advertising sales in the current quarter after a significant softness in volumes, especially after Thanksgiving.
"We are seeing signs of recovery in the current quarter scatter with a number of buyers returning to the market," said Dauman on a conference call. "As they do, we are confident that our brands will capture their share of dollars.
Dauman also said that without what he described as the discrepancy with Nielsen's Nickelodeon ratings, advertising revenue would have been up in the low single digits overall.
Viacom said earnings from continuing operations in its first quarter, that ended December 31, fell 5 percent to $591 million. But earnings per share rose 4 percent to $1.06, boosted by aggressive share buybacks. Analysts on average had been expecting $1.05 per share, according to Thomson Reuters I/B/E/S.
Revenue rose 3 percent to $3.95 billion, helped by a double-digit increase in fees paid by cable, satellite and phone distributors for carriage of its newtworks. Revenue was also helped by box office success for movies by its Paramount Studios unit, including "Mission Impossible - Ghost Protocol" and "Paranormal Activity 3."
Viacom's affiliate fees have been given a healthy boost from digital licensing of its TV shows and movies to partners including Netflix Inc (NFLX.O) and others.
Dauman said the company sees high-single to low double-digit growth in overall affiliate fees for the foreseeable future.
But he dismissed speculation that Nickelodeon's TV ratings could have been hurt by licensing children's programming to Netflix, which offers a much cheaper on-demand package of shows than cable.
"It could have been some minimal impact but it certainly does not account for the range drop that we saw," said Dauman.
Viacom spent $700 million buying back 16.2 million shares during the quarter.