Viacom (VIAB) Slips To 52-Week Low: What's Taking It Down?

Shares of Viacom, Inc. (NASDAQ:VIAB) tumbled to a 52-week low of $28.48 during the trading session on Aug 18. However, the figure recovered marginally to close the trading session at $28.59, down 2.1% from the closing price of Aug 17.

Why the Decline?

Earlier in the month, while releasing results for the third quarter of fiscal 2017,the company issued a bleak outlook with respect to domestic affiliate revenues. In fact, this New York- based company expects the metric to decline in low-single digits in the fiscal fourth quarter. The view displeased investors. Consequently, the stock declined in after-market trading on Aug 3, despite the outperformance in fiscal third quarter.

Moreover, we note that Ancillary revenues at the company’s primary division, Media Networks, declined 9% to $135 million in the fiscal third quarter, primarily due to a massive 17% fall in Domestic Ancillary revenues.

In fact, the company’s shares have been on a downtrend since its third-quarter fiscal 2017, losing 18.5%. Notably, investors remain concerned about the lowering rate of cable subscriptions as consumers switch to online streaming services. In comparison, the industry it belongs to has declined 5.8% in the period.

Moreover, Viacom's high debt levels remain concerning. The company exited the fiscal third quarter with a debt to capitalization ratio of more than 66%, which is very high. In fact, the ratio of its long-term debt-to-equity (expressed as a percentage) is currently well over 100. This compares unfavorably to the figure of 60% for its industry and also the S&P 500 index, for whom the measure reads 84%.

Furthermore, the company is hurt by adverse foreign currency movement as it operates globally.

Certainly Not a Broker Favorite

Given the challenges faced by the company, it is natural that the stock is not a favorite of brokers right now. The Zacks Consensus Estimate for the fiscal fourth quarter has moved down 11.9% to 89 cents in the last month, due to multiple downward revisions.

Given the wealth of information at the disposal of brokers, it is in the best interests of investors to be guided by broker advice and the direction of their estimate revisions. Notably, the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.

Zacks Rank & Stocks to Consider

Viacom carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Consumer Discretionary sector are Adidas (DE:ADSGN) AG (OTC:ADDYY) , Activision Blizzard Inc (NASDAQ:ATVI) and Central Garden & Pet Company (NASDAQ:CENT) sporting a Zacks Rank #1 ( Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Adidas and Central Garden & Pets have soared above 27% in a year, whereas Activision Blizzard hares have rallied 52% over the same period.

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