UPDATE 3-Viacom shares shine on upbeat distributor revenue forecast

* Q1 adj. EPS $1.03 vs. est. 94 cents

* Raises forecast for full-year U.S. affiliate sales

* Shares jump as much as 12 pct (Adds CEO comments, updates shares, background)

Feb 8 (Reuters) - Viacom Inc, exploring a merger with CBS Corp, said on Thursday it expects a smaller drop in full-year revenue from U.S. cable and satellite companies than it had previously anticipated, sending its shares up as much as 12 percent.

The company's affiliate revenue - the sales it generates from distributors - has been pressured as millions of subscribers move to online streaming services such as Netflix Inc and Amazon.com Inc's Prime Video.

Viacom expects affiliate sales in the United States to decline by low to mid-single digit percentages, compared with an earlier forecast of a mid-single-digit decline for fiscal 2018, Chief Executive Officer Bob Bakish said.

"I feel very good about our trajectory ... far better than I felt this time last year," Bakish said.

In early 2017, Bakish engineered a turnaround plan that involved focusing on five of Viacom's cable TV brands and the Paramount movie studio, license less content to video streaming companies and consider selling assets.

The company's net profit jumped to $535 million from $396 million in its fiscal first quarter, largely driven by cost cutting efforts.

"The stock rose on management's expressions of optimism in the post-earnings call that the transitional phase is progressing well," Barrington Research Associates analyst James Goss said.

The results come at a time when Viacom's controlling shareholder, Shari Redstone, has been urging CBS, which she also controls, to revisit a possible merger with Viacom.

A deal between CBS and Viacom would pair CBS's broadcast network, TV studios and Showtime cable network with Viacom's Paramount Pictures and networks, giving the combined company scale and more leverage with cable and satellite companies.

Viacom's U.S. sales through cable and satellite companies dropped 8 percent due to declines in the number of people paying for cable and lower revenue from online streaming services.

Overall affiliate revenue fell 4 percent, while advertising revenue rose 1 percent, both in line with analyst estimates, according to Thomson Reuters I/B/E/S.

Total revenue fell 7.6 percent to $3.07 billion in the quarter, missing the average analyst estimate of $3.14 billion, while total expenses dropped 10 percent to $2.26 billion in the quarter.

Excluding items, the company earned $1.03 per share, beating the average estimate of 94 cents. (Reporting by Muvija M in Bengaluru and Jessica Toonkel in New York; Editing by Saumyadeb Chakrabarty and Bernadette Baum)