), the media giant that controls Paramount Movie Studio and several
leading cable TV channels, currently offers an attractive dividend
yield of 2.2%. With a long-term earnings potential of 14.7%, this
Zacks #2 Rank (Buy) also offers solid growth potential backed by an
improving advertisement market, upcoming movies for the holiday
season and a solid tie-up with pay-TV operators.
Solid Dividend Yield
Viacom has been paying dividends for 10 consecutive quarters. Last
August, management raised its dividend rate by 10%. Currently, the
company offers a lucrative dividend yield of 2.2%, significantly
higher than the industry average of 1.8%.
A Mixed Quarter
On November 15, Viacom reported mixed financial results for its
fiscal fourth quarter. Earnings per share of $1.21 surpassed the
Zacks Consensus Estimate by 1.7% and the year-ago earnings by
14.2%. However, total revenue of $3,363 million dropped 17% year
over year and fell short of the Zacks Consensus Estimate by 1.9%.
Affiliate fee (paid by pay-TV operators) revenue increased 12% in
the U.S. and 11% in the international markets on a year-over-year
basis. However, this strong performance was offset by a 6% decline
in domestic advertising revenue and a 7% decline in international
advertisement revenue. Nevertheless, operating income increased by
a sharp 13% to $1,050 million from $929 million.
Earnings estimates for Viacom have been static for the past several
weeks. The Zacks Consensus Estimate for fiscal 2013 is unchanged at
$4.76, while the Zacks Consensus Estimate for fiscal 2014 crept up
by a penny to $5.46 in the past 7 days.
The current Zacks Consensus Estimates for 2013 and 2014 reflect
estimated year-over-year gains of 13.1% and 14.7%, respectively.
Viacom currently looks attractive with respect to several valuation
metrics. The stock's forward P/E of 10.50x indicates a huge
discount of 23.2% from the peer group average of 13.67x. With
respect to the forward P/S metric, the stock is currently trading
at 1.9x, slightly higher than the peer group average of 1.68x.
Viacom looks quite attractive given its trailing 12-month ROE of
29.5%, which is 85.5% higher than the peer group average of 15.9%.
Chart Looks Promising
Shares returned to a growth trajectory on November 15 (the day the
company reported its fiscal fourth quarter results),. Going
forward, there is an untapped potential locked in the stock, which
is evidenced by its current long-term growth potential of 14.7%,
significantly higher than the industry growth potential of 12.9%.
Based in New York, Viacom Inc. is a leading entertainment content
company that operates primarily in the U.S. and Europe. The company
is a global leader in the creation, promotion, and distribution of
film entertainment, news, sports and music programs. Viacom offers
many of the world's best known entertainment brands. Prominent
among them include MTV, MTV2, VH1, VH1 Classic, CMT, Nickelodeon,
Logo, Nick at Nite, Nick Jr., Teenick, COMEDY CENTRAL, Spike TV, TV
Land, BET, Rock Band, mtvU, MTV Tr3s, and Paramount Pictures.
Viacom currently has a market cap of approximately $25.2 billion.
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