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Viacom 4Q surprises Street
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February 16, 2000: 1:57 p.m. ET
Media company posts 48% rise in profit, reflecting cable, video operations
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NEW YORK (CNNfn) - Viacom Inc. on Wednesday posted a 48 percent increase in fourth-quarter profit on the strength of strong performances at MTV and its other cable and video operations, surprising Wall Street investors who were expecting a slight earnings decline.
The New York-based company, which also owns Nickelodeon and Blockbuster Inc., posted fourth-quarter earnings of $133.1 million, or 19 cents a share, from continuing operations, up from about $90 million, or 15 cents a share, in the year-ago quarter.
Including one-time losses, Viacom's fourth-quarter earnings jumped nearly four-fold. Analysts polled by research firm First Call Corp. had forecast a fourth-quarter operating profit of 14 cents a share.
Separately, the company also announced plans to buy back up to $1 billion of its common stock.
Still, the better-than-expected earnings failed to excite investors. After opening the day higher, Viacom (VIA: Research, Estimates) shares fell 3-1/2, or more than 5 percent, to 55-1/4 in early afternoon trading.
Analysts said the stock was being dragged down by overall weakness in media stocks Wednesday.
"The overall market is down; everything is getting hit," said Scott Davis, a media analyst with Schroeder & Co. "The quarter was a solid quarter for them and it was basically in line. But really, people aren't focused so much on the earnings anymore. They are more interested in the merger."
Avoiding a 'Titanic' shortfall
Results in the 1998 quarter were boosted by the hit movie "Titanic," leading analysts to believe the company would have a difficult time matching that performance.
But Viacom, which last year agreed to buy CBS Corp. (CBS: Research, Estimates) for $37 billion, still managed to boost revenue 7 percent to $3.5 billion, reflecting a surge in advertising revenue at its cable networks.
Advertising sales growth at popular Generation-X network MTV were particularly brisk, growing 20 percent during the quarter. That helped push Viacom's overall network revenue, also aided by revenue increases at VH-1 and Showtime, up 14 percent to $925 million.
Blockbuster, which Viacom partially took public last year, also continued to perform well. Video revenue for the quarter grew about 10 percent to $1.2 billion, although earnings were restrained by a big investment in launching its Internet operation.
Analysts are now projecting Viacom's Internet losses could top $150 million this year, roughly two-and-a-half times the level they first projected.
Even the company's entertainment group managed to avoid sinking under the weight of a "Titanic" comparison. The group posted a 4 percent increase in overall revenue, driven by higher television syndication revenue and increased theatrical and overseas home video revenue.
For the full year, Viacom earned $371.7 million, or 45 cents a share, compared with a loss of $149.6 million, or 21 cents a share, a year earlier. Revenue increased 6.3 percent to $12.86 billion.
The company's performance led several analysts to reiterate their strong growth forecasts for this year, although some warned the first two quarters could be a little slow.
"The first quarter of 2000 will be challenged by very tough entertainment comparisons against last year's hits 'Varsity Blues' and 'Payback,'" said Jill Krutick, an analyst with Salomon Smith Barney. "In addition, the timing of the Easter holiday (which falls in the second quarter this year) could shift advertising sales into the second quarter. We will likely be shifting our estimates out later in the year." 
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Viacom Inc.
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