On Feb 28, we maintained our Neutral recommendation on
), as the company's bottom line meets the Zacks Consensus
Estimates but the top line fell short of the same in the recently
Why Remains Neutral?
Viacom benefits from a well-balanced asset mix with
entertainment content at its core. The company enhanced its
brands worldwide through the creation and acquisition of hit
programming, new channels, successful motion pictures and other
forms of entertainment, including video game offerings.
Viacom benefits immensely from its agreement to disribute
digital content to online video streaming companies, such as
Netflix and Hulu. These businesses generate very high margins,
around 75%, while facilitating the company to significantly
improve its bottom line.
Management is hopeful that it will be able to expand its
digital content distribution deals, both in the U.S. and in the
international markets going forward.Moreover, Viacom is
generating strong free cash flow, enabling the company to
maximize its shareholders' wealth through dividend payments and
On the flipside,the cable TV industry in the U.S. is highly
matured and saturated. Viacom's flagship cable channels are
already distributed and there is limited scope for driving
revenues by enlarging distribution channels. Viacom has done
extremely well in its digital content distribution business.
However, in the long run, these lucrative deals with online
video streaming companies may act as a boomerang for the company.
Moreover, online video streaming companies have posed major
threat for the cable TV operators, who may not be able to pay
higher affiliate fees to Viacom since its contents can be viewed
Both its advertising and film business witnessed a huge drop
in revenues, mainly attributable to weak viewership ratings,
mainly for Nickelodeon and MTV channels and lack of hit movie
releases. Moreover, the stock price is hovering around its
Currently, Viacom has a Zacks Rank #3 (Hold).
Other Stocks Outlook in Related Industries
Other companies belonging to the same media sector are
), which reported strong profit in the fourth quarter despite
missing both the top and bottom line of the Zacks Consensus
Time Warner Inc.
) bottom line topped the Zacks Consensus Estimates with profit
for the fourth quarter surging high with 24% and
The Walt Disney Company
) beat both the top and bottom line of the Zacks Consensus
Estimates, despite profit dipping 1.3% for the first quarter of
CBS Corporation has a Zacks Rank #2 (Buy) while bothTime
Warner Inc. and The Walt Disney Company have Zacks Rank #3
CBS CORP (CBS): Free Stock Analysis Report
DISNEY WALT (DIS): Free Stock Analysis Report
TIME WARNER INC (TWX): Free Stock Analysis
VIACOM INC-B (VIAB): Free Stock Analysis
To read this article on Zacks.com click here.