* Both Redstone companies beat expectations
* Viacom reverses ad slump
* Time Warner, Comcast struggle
By Jennifer Saba and Liana B. Baker
May 1 Sumner Redstone had a good day on
Wednesday as his two companies Viacom Inc and CBS Corp
reported quarterly results that beat Wall Street
estimates on the back of unexpectedly strong TV advertising
Viacom reversed a long ad revenue slide, surprising analysts
by posting growth in the first quarter. CBS reported a profit
that easily beat the most optimistic of Wall Street estimates,
as special events helped its broadcast network increase ad
revenue by 8 percent.
Viacom shares touched a new multiyear high before closing up
2.6 percent on the Nasdaq, while CBS shares rose 1 percent in
"Viacom had ratings pressure for a long time, so it's
significant that they have turned the corner in terms of ad
growth, which is now positive instead of negative," said Brett
Harriss, an analyst with Gabelli & Co.
Redstone is executive chairman of the two companies, which
used to be a single entity. Over the last four years, CBS shares
have risen more than 1,100 percent, while Viacom shares are up
around 280 percent, both exceeding peers.
Their results come against the backdrop of a relatively weak
advertising market in the first quarter. Unlike last year, there
are no national elections or Olympics this year, putting a bit
of a damper on the business.
At Time Warner Inc, weakness at CNN dragged on
results, while Comcast was hurt by the
struggles of its broadcast network, NBC. Both companies beat
Wall Street's earnings expectations, however, though that was
driven by strength in other segments of the media business.
While ad spending is growing globally, expectations have
fallen recently. Zenith Optimedia recently cut its 2013 spending
growth forecast to 3.9 percent from 4.1 percent. Within that
forecast, North America is one of the laggards, growing much
more slowly than Asia, Latin America and the Middle East.
VIACOM, CBS SHINE
CBS reported its highest-ever revenue and operating income,
as advertising revenue rose 8 percent in the period. The company
benefited from a number of special events during the quarter,
including the Super Bowl.
The network has also dominated broadcast ratings this
season, with five of the top-10 prime time shows in the most
recent week, according to Nielsen ratings.
Viacom reported a 6 percent drop in revenue because of a
weak slate of movies from its studio, Paramount Pictures, but
advertising sales turned positive during the quarter.
At its cable network properties, including MTV and
Nickelodeon, advertising revenue rose 2 percent in the United
States. On a call with analysts, Viacom CEO Philippe Dauman said
the improvement in ad sales correlated to rising ratings, with
Nickelodeon posting its strongest growth in two years.
"The importance of original programming driving ratings and
ultimately driving ad sales is pretty clear," said Tim Nollen,
an analyst at Macquarie.
Viacom has been struggling with a decline in ratings, which
are the currency for commercials. The children's network
Nickelodeon in particular was a drag.
TIME WARNER AND COMCAST
For Time Warner, first-quarter ad revenue at cable
properties including TNT and news channel CNN fell 1 percent.
UBS analyst John Janedis said in a note to clients he thinks
it had to do with weak ad rates and what he characterized as
But ratings also fell, with Evercore Partners estimating a
decline of 4 percent for Time Warner's cable networks in the
The company said second-quarter ad revenue at its networks
will be up in the high single digits in percentage terms.
Time Warner shares ended regular trading on Wednesday down
0.5 percent at $59.48, recouping some earlier losses.
Comcast, which unlike the other three companies combines
media properties with a cable television system, benefited more
from cable than from its media unit.
The company lost more video customers than expected but
gained more Internet subscribers than estimated. On the other
hand, operating cash flow at NBC Universal was a negative $35
million, much worse than a year earlier.
Revenue at NBC also fell because the network did not have
the lucrative Super Bowl this year, TV's premiere advertising
Shares of Comcast rose 1.4 percent to $41.86, giving back
some of their earlier gains.