Earning Scorecard: Viacom Inc. - Analyst Blog

Viacom Inc. ( VIA.B ) declared blockbuster fourth quarter 2011 financial results, where both earnings per share ( EPS ) and total revenue exceeded the Zacks Consensus Estimate. The solid performance was mainly attributable to the huge success of the movie Transformers: Dark of the Moon , which generated more than $1 billion during the quarter.

In synergy with such strong performance, the company also increased its share repurchase authorization from $4 billion to $10 billion.

Fourth Quarter Highlights

Quarterly total revenue was $4,053 million, up 22% year over year and ahead of the Zacks Consensus Estimate of $3,742 million. The significant upside in revenue was mainly attributable to the strong performance of Filmed Entertainment and Media Networks segments. Quarterly operating income was $929 million, up 11% year over year.

Quarterly net income from continuing operation was $576 million or $1.00 per share in the reported quarter compared with $488 million or 80 cents per share in the prior-year quarter. However, adjusted (excluding debt extinguishment cost) EPS of $1.06 was well above the Zacks Consensus Estimate of $1.02.

Agreements of Analysts

Of the 19 analysts covering the stock in the last 7 days, none revised their estimates upward for the first quarter of 2012 but one analyst reduced his or her EPS estimate. Likewise, for the second quarter of 2012, out of the 19 analysts covering the stock in the last 7 days, only one analyst increased his or her EPS estimate.

For fiscal 2012, out of the 24 analysts, none increased or decreased their estimates. However, for 2013, out of the 16 analysts, only one analyst revised upward.

Currently, the Zacks Consensus EPS Estimate for the first quarter of 2012 is pegged at $1.10. The projected annual growth rate is 7.64%. Similarly, for the second quarter, the current Zacks Consensus EPS Estimate of 90 cents reflects a year-over-year gain of 25.51%.

Magnitude of Estimate Revisions

For the first and second quarter of 2012, the current estimate remained in line with the Zacks Consensus Estimates of $1.10 and 90 cents, respectively, over the last 7 days. Likewise, for fiscal 2012, the current estimate was also at par with the Zacks Consensus Estimate of $4.29. However, for fiscal 2013, the current estimate was just a penny above the Zacks Consensus Estimate of $5.05.

Earning Surprises

With respect to earnings surprises, the company's fairly good track record is expected to continue in the coming quarters. Viacom produced an earnings surprise of 4 cents or 3.92% in the last quarter.

The current Zacks Consensus Estimate for the first quarter of 2012 reflects a negative 0.91% earning surprise but the upcoming quarter contains 1.11% upside potential (essentially a proxy for future earning surprises) while for fiscal 2012 and fiscal 2013, the Zacks Consensus Estimates upside potentials are 0.00% and 0.59%, respectively.

Our Recommendation

Viacom is well positioned for long-term growth as it continues to benefit from its predominately cable networks-based business model, strong affiliate fee revenue growth, global brands, strong share repurchase plan, multi-platform content, and is one of the fastest growing traditional ad media. Moreover, hit movie releases like The Adventures of Tintin and Mission Impossible: 4 during this holiday season will drive box-office success going forward.

However, stiff competition from other media companies like News Corp. ( NWSA ) and Time Warner Inc. ( TWX ), along with a slow economic recovery, may act as headwinds for the stock going forward.

We, thus, maintain our long-term Neutral recommendation for Viacom. Currently, Viacom has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

About Earnings Estimate Scorecard

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These "Earnings Estimate Scorecard" articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at:

NEWS CORP INC-A ( NWSA ): Free Stock Analysis Report

TIME WARNER INC ( TWX ): Free Stock Analysis Report

VIACOM INC-B (VIA.B): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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