April 25, 2018 / 11:30 AM / a year ago

Viacom forecasts growth rebound in U.S. ad sales, affiliate revenue

(Reuters) - Viacom Inc (VIAB.O), in tough merger talks with CBS Corp (CBS.N), said on Wednesday it expects a return to growth in domestic ad sales in the fourth quarter and from revenue from U.S. cable and satellite companies next fiscal year.

The Viacom office is seen in Hollywood, Los Angeles, California, April 24, 2018. REUTERS/Lucy Nicholson

The forecast came as Viacom reported better-than-expected second-quarter profit and revenue, which could help the media and entertainment company as it negotiates with CBS over a potential merger.

Viacom said on a conference call it would not discuss the ongoing talks with CBS.

Viacom and CBS, both owned by National Amusements Inc, Sumner and Shari Redstone’s family holding company, have been going back and forth on price and management in a combined company in the

merger talks, sources have told Reuters.

Viacom Chief Executive Officer Bob Bakish has implemented a turnaround plan, which included improving programming at its cable TV networks, include Comedy Central, MTV and Nickelodeon, and improving relations with distributors.

Viacom’s shares rose 1.3 percent to $31.31 in late-morning trading.

Viacom’s Paramount Pictures returned to profitability as it sold “The Cloverfield Paradox” and the international rights to horror movie “Annihilation” to video streaming service Netflix Inc (NFLX.O).

Performance at the film division helped Viacom’s operating income surge 37 percent to $456 million in the second quarter.

“Viacom’s management does appear to be doing a lot of the right things,” Cowen analyst Doug Creutz said.

“Still, they face tough secular trends and the fact that their core youth audience isn’t engaging with TV nearly as much as they used to.”

Viacom’s domestic advertising revenue fell 3 percent to $841 million, while analysts expected a 3.8 percent decline, according to financial and data analytics firm FactSet.

Domestic affiliate revenue, or the fees collected from U.S. cable and satellite operators and online distributors, fell 4 percent to $934 million in the quarter. Analysts expected a 4.2 percent drop, according to FactSet.

Net income attributable to Viacom rose to $256 million, or 64 cents per share, from $121 million, or 30 cents, a year earlier.

On an adjusted basis, the company earned 92 cents per share.

Total revenue fell 3.3 percent to $3.15 billion.

Analysts, on average, expected profit of 79 cents on revenue of $3.03 billion, according to Thomson Reuters I/B/E/S.

Reporting by Laharee Chatterjee in Bengaluru and Jessica Toonkel in New York; Editing by Sriraj Kalluvila and Jeffrey Benkoe

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