Despite declining advertising sales and soft ratings at some of its top networks, Viacom stock rose nearly 5% in early trading Thursday on investor sentiment that it could have been much worse.
Domestic ad sales for the fiscal fourth quarter were down 6% in the period, about in line with analysts’ estimates, while overall revenue declined 17% to $3.4 billion and adjusted operating income fell 1% to $1.1 billion. But despite those shortfalls, Viacom managed to squeeze a 12% gain in net income to $643 million and a 24% increase in earnings per share to $1.21 per share, which some analysts mostly attributed to a lower effective tax rate and foreign exchange rates.
That helped drive Viacom stock up as much as 4.8% ($2.32 each) to $50.31 in early trading Thursday. The stock closed at $49.23, up 2.6%, or $1.24 per share.
“Viacom FQ4 results were absolutely bad but relatively good (versus very low expectations),”
Sanford Bernstein media analyst Todd Juenger wrote in a research note early Thursday. “…While the lack of a miss will likely provide some relief relative to fears of a disaster scenario in the near-term, the market always looks forward and the question is, will it get better?”
On a conference call with analysts, Viacom CEO Philippe Dauman said ratings were showing signs of recovery. At MTV – which has been plagued by a double-digit ratings decline in the past several quarters – the debut of docu-series Catfishwas the highest-rated launch in the network’s history. The finales of Jersey Shore and Teen Mom are expected to have strong showings and there are a number of promising new programs in the pipeline.
Asked if Viacom would look for growth through acquisition, particularly studio assets, Dauman said that Viacom has not seen anything that would make sense for the company.
“We are living in a world where the media business is transitioning,” Dauman said. “We are extremely well positioned to grow in that transition because we have a deeper understanding of the young audiences that are driving that transition than any media group out there."
Dauman said on the call that although there has never been a direct correlation between ad sales and ratings over discrete periods of time, the company obviously has to grow its ratings. The good news, he said, is that once ratings improve, Viacom can monetize them quickly.
“We don’t have a demand issue,” Dauman said on the call, referring to the advertising market. “What we have experienced is a supply issue – meaning ratings. We are engaging in self-help. We are going to create the supply so that we will capture the demand that we have out there.”
Dauman wouldn’t make any excuses for the past ratings declines – adding that Viacom will focus on the things it can change, like improving programming which should in turn drive viewership.
Some of those changes are in leadership – MTV recently hired former The WB and Lifetime executive Susanne Daniels as president of programming -- and Dauman said other changes have been made at Nickelodeon and other nets.
Dauman said he was excited about Daniels, a highly respected programming executive – coming on board at MTV.
And he seemed to chafe at one analysts' suggestion that the iconic network was "broken."
"It [MTV] is not broken," Dauman said on the call."It's highly successful. ...I have no concerns about MTV's vitality as we go forward."