Viacom reported Q3 results that exceeded expectations and had analysts cheering.
From Anthony DiClemente of Barclays Capital:
“Viacom reported operating income (OI) and EPS solidly ahead of our estimates, as worldwide affiliate fee growth outperformed, “Rock Band” sold better than expected, and margins came in way ahead. Media Networks margins improved by 240 bps Y/Y, driven by likely continued core margin expansion.
3Q09 total revenues of $3.32B (-3% Y/Y) were basically in-line with our estimate for $3.38B (-1% Y/Y), while OI of $784M (+24% Y/Y), and adj. EPS of $0.69 nicely beat our expectations for $686M (-0.4%Y/Y) and $0.56, respectively.
At Media Networks, domestic advertising decline of -4% Y/Y was on par with our estimate of -4% Y/Y, and improved Q/Q by 200 bps. Worldwide affiliate fee revenues grew 10% Y/Y, roughly 250 bps ahead of our estimate.
Rock Band software sales helped to sequentially improve the ~40% ancillary revenues decline in 2Q09, as ancillary revenues were down just 3%.
Film OI of $69M was ahead of our $54M expectation, driven by the carry-over of strong box office performance from 2Q09. We continue to expect a big 4Q09 for the Film segment.”
From Benjamin Mogil of Thomas Weisel Partners:
“Viacom reported stronger than expected 3Q09 results. Revenue/EBITDA/EPS of $3.317bn/$864mn/$0.69 respectively were ahead of our estimates of $3.38bn/$760mn/$0.53 and consensus of $3.244bn/$767mn/$0.55. Both Media and Film performed better than we expected but the turn was largely at the Film where despite soft home entertainment markets, stronger cost controls lead the unit to post EBIT of $69mn vs. our -$24mn estimate. Looking forward 4Q09 should be strong at Film as “Transformers: Revenge Of The Fallen” is the #1 DVD title so far this year having sold nearly 2mn copies alone on the first day of its release (actual scanned retail purchases).
On Media, advertising continued to improve sequentially (domestic improving 200bp from 2Q09) and given that Viacom (and all other cable channel networks) held back record amounts of inventory from this year’s upfront, effectively leveraging their exposure to the spot/scatter market, this continued turn in the ad markets is very positive.”
