We reiterate our long-term Neutral recommendation on
). The company reported mixed financial results for the second
quarter of fiscal 2013. While the net income beat the Zacks
Consensus Estimate, revenues fell below the same.
Why Kept at Neutral?
We believe that Viacom is well positioned for long-term growth
as it continues to benefit from its predominantly cable
networks-based business model, hit movie releases, and
monetization of contents from multiple distribution platforms.
Viacom significantly improved its viewership ratings for its
immensely popular Nickelodeon and MTV channels. In the reported
quarter, the viewership rating was up 7% year over year compared
with a stiff fall of 30% over the last one year.
Viacom is offering video-on-demand websites to
)'s U-Verse customers,
Time Warner Cable Inc.
) subscribers to watch their content online, thereby driving
their new TVEverywhere service for the years to come.Viacom
immensely benefits from its agreement to distribute digital
content to online video streaming companies. Management is
hopeful that it will be able to expand its digital content
distribution deals, both in the U.S. and internationally in the
However, in the last quarter, the Filmed Entertainment segment
suffered a blow due to a significant drop in the carryover and
catalog revenues. At present, more than 90% of the company's
operating income is coming from its pay-TV networks. However, the
U.S. pay-TV industry is facing severe challenges from online
video providers.Meanwhile, the stock price has soared nearly 54%
in the last year and is currently trading at the high-end of its
52-week price range. We believe Viacom is currently fairly
valued.Viacom currently has a Zacks Rank #3 (Hold).
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VIACOM INC-B (VIAB): Free Stock Analysis
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