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Viacom lowers earnings guidance for the first time since 2008

A day after Sumner Redstone moved to fire CEO Philippe Dauman and four other directors from Viacom's board, the embattled media giant said Friday its fiscal third-quarter earnings will fall short of estimates.

It was the first time since October 2008 that it has put out such guidance, Reuters said.

The company also said it expects domestic sales to decline about 4 percent in the quarter, better than the last quarter's 5 percent drop.

Its stock price was up nearly 1 percent late Friday morning, but later reversed and ended the session down 1.4 percent.

The company issued its guidance a day after the board shakeup announcement. Dauman remains CEO for now of the $40 billion media giant and he and the four others will stay on the board until a Delaware court affirms the changes.

After the board moves, analysts at RBC Capital Markets said Friday that Viacom's future looked brighter. "Coming change to Viacom's management removes a major overhang," they said in a note to clients, titled "A New Hope."

RBC upgraded Viacom shares to sector perform from underperform and raised the price target on the share price to $45 from $34.

"When we initiated coverage on Viacom with an Underperform rating, we felt that strategic and earnings risks existed, and embattled management was unlikely to change due to the controlling interest of National Amusements (NAI)," the analysts said, referring to Redstone's privately owned holding company. "A lot has changed on the management front, ... which we believe paves the way for his eventual removal."

National Amusements owns 80 percent of Viacom shares.

Questions have been raised about whether the 93-year-old Redstone is making his own decisions or whether he is sound enough to do so. Last month, a California judge dismissed a lawsuit questioning the media mogul's competency.

Viacom's Class B shares have done well this year, trading nearly 8 percent higher, yet remain more than 33 percent lower over the past 12 months.

VIAB 12-month chartSource: FactSet

Disclosure: RBC makes a market in Viacom shares.

Clarification: This story was revised to clarify that Dauman and the four other board members will remain as directors at least temporarily, pending a court decision.