Viacom on Thursday reported better-than-expected quarterly earnings but a decline in domestic advertising spending at the media company’s cable TV networks hit its share price.
For the second quarter, Viacom’s revenue rose 8.5% to $3.26 billion, beating analysts’ expectations of $3.02 billion. Net income declined to $121 million, or 30 cents a share, from $303 million, or 76 cents a share, in the year-ago quarter but adjusted earnings came in at 79 cents a share.
Analysts on average had expected earnings of 59 cents per share, according to Thomson Reuters I/B/E/S.
Revenue from Viacom’s filmed entertainment business was also a bright spot, jumping 37% to $895 million. “In the second quarter, Viacom delivered continued top-line improvement, with growth in affiliate revenues, international media networks and across every business segment of Paramount Pictures,” CEO Bob Bakish said in a news release.
But in trading Thursday, Viacom’s shares fell more than 7% to $36.46, adding to losses that began earlier in the week.
The stock “began tumbling this week as Wall Street became spooked by signs of a weaker ad market and evidence of a dramatic rise in pay-TV customers deciding to ‘cut the cord,’ or stop subscribing,” the Los Angeles Times said.
As Reuters reports, the ad market for companies like Viacom has weakened as viewers cancel cable subscriptions to watch content online and advertisers increasingly shift ad dollars to the web. The industry lost an estimated 726,000 subscribers, over five times last year’s loss of 141,000, in the first quarter.
Viacom’s domestic ad sales dropped 4% in the second quarter, compared with analysts’ expectations of a drop of only 3%.
Another headwind facing the company is the news that Charter Communications has re-tiered five of Viacom’s flagship networks to its most expensive programming tier. Deutsche Bank estimated the re-tiering will reduce affiliate and advertising revenue by about 5%, mostly over a 3-year period.
In the second quarter, Viacom’s affiliate revenue rose 2% to $1.16 billion in the quarter, reflecting higher rates.