Will Subscriber Woes Mar Viacom's (VIAB) Earnings In Q1?

Viacom, Inc. (NASDAQ:VIAB) is scheduled to release its first-quarter fiscal 2018 (ended Dec 31, 2017) results on Feb 8, before the market opens.

Last quarter, the company’s earnings (on an adjusted basis) of 77 cents per share missed the Zacks Consensus Estimate of 85 cents. The bottom line, however, expanded 11.6% on a year-over-year basis owing to lower expenses and higher revenues.

Quarterly revenues increased 2.9% year over year to $3,319 million. The top line surpassed the Zacks Consensus Estimate of $3,240.5 million. The outperformance was primarily owing to growth in the Media Networks and Filmed Entertainment units.

Let’s see, how things are shaping up for this announcement.

Factors to Consider This Quarter

Viacom’s results, in the soon-to-be-reported quarter, are likely to be hurt by weak affiliate revenues in the United States owing to loss of subscribers. The Zacks Consensus Estimate for first-quarter fiscal 2018 affiliate revenues is pegged at $1, 076 million, below $1,150 million in the previous quarter.

In the United States, the company expects affiliate revenues to remain weak, particularly in the first half of fiscal 2018. On the domestic front, the same is projected to decline in mid-single-digits in the current year.

Apart from soft affiliate revenues, advertising revenues are likely to remain weak in the fiscal first quarter. In fact, soft advertising and affiliate revenues are likely to hurt the company’s primary division — Media Networks. Below-par performance of the company’s principal revenue generating division will naturally hurt its overall results. Moreover, higher programming expenses have the potential to hurt results in the to-be-reported quarter.

However, the company’s performance on the international front is anticipated to be much better. Additionally, strong growth in international consumer products is likely to boost ancillary revenues. Similarly, internal growth should boost total advertising revenues, mitigating the weakness on the domestic front. The Zacks Consensus Estimate for first-quarter fiscal 2018 advertising revenues stands at $1,313 million, above $1,220 million in the previous quarter.

Performance of the company’s other division — Filmed Entertainment — is likely to be hurt by a decline in theatrical revenues in the quarter to be reported. The Zacks Consensus Estimate for theatrical revenues is projected at $89 million, well below $115 million in the preceding quarter.

Apart from the earnings numbers, investors are likely to keenly await for detailed commentary on the potential Viacom - CBS Corporation (NYSE:CBS) merger.

What Does Our Model Say?

Our proven model too does not show conclusively that Viacom will beat earnings in first-quarter fiscal 2018. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. However, that is not the case as highlighted below.

Zacks ESP: Viacom has an Earnings ESP of -1.64% as the Most Accurate estimate is pegged at 2 cents below the Zacks Consensus Estimate of 98 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Viacom carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction inconclusive. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for first-quarter fiscal 2018 earnings reflects a 5.8% decrease on a year-over-year basis, mainly due to weak advertising and affiliate revenues. The same for sales is projected at $3.1 billion, down 5.5% year over year.

Viacom Inc. Price and EPS Surprise

Viacom Inc. Price and EPS Surprise | Viacom Inc. Quote

Stocks to Consider

Investors interested in the broader Consumer Discretionary sector may consider the following stocks, possessing the right combination of elements to beat on earnings in their next releases.

Discovery Communications (NASDAQ:DISCA) has an Earnings ESP of +6.50% and a Zacks Rank of 3. The company will report fourth-quarter 2017 results on Feb 27.

Nike (NYSE:NKE) has an Earnings ESP of +2.48%. The Zacks #3 Ranked company is expected to report third-quarter fiscal 2018 results on Mar 20.

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