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What To Expect From Viacom's Earnings

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CNBC.com

Viacom kicks off a barrage of media giant earnings when it reports before the bell Tuesday morning.

Throughout the next few weeks of media earnings reports we're likely to hear some common themes. 1) Advertising declines are hurting results, but CEOs have indicated over the past few months that declines seem to be stabilizing. 2)Cable television's dual revenue stream continues to bolster media giants. 3)Strong box office returns are good news, but DVD sales continue to decline. And 4), expect lots of questions in the post-earnings calls about consolidation, both in terms of the potential deal between Comcast and CNBC's parent NBC Universal, and beyond.

Viacom is expected to report earnings of 57 cents per share, up two cents per share from last year, on $3.3 billion in revenue, down from last year. CEO Philippe Dauman has said that advertising declines have moderated, so Wall Street will be carefully watching the ad numbers from Viacom's cable networks, no doubt its bread and butter. Analysts are expecting an increase in ad revenue compared to the 6 percent decrease in the second quarter. Strong growth in the affiliate fees — expected to be in the double digits — should also help.

It's certainly been a good year for Viacom's studio. Paramount had the biggest movie of the year: "Transformers 2: Revenge of the Fallen," as well as the most profitable film in years, the $11,000-budget runaway hit, "Paranormal Activities." DVD sales of the Transformers film should be a real help, as should Beatles: Rock Band, which debuted in early September. Next year Viacom will have another couple films from Marvel Entertainment, including an Iron Man sequel. But we can expect some questions about how this distribution relationship with Marvel will shake out once Disney's acquisition of Marvel goes through.

Viacom's Chairman Sumner Redstone will as usual be in the spotlight. Last month, in an attempt to pay down debt, Redstone's National Amusements holding company sold part of its CBS and Viacom shares to raise some $1 billion. This should help reassure investors that Redstone would be forced to sell more of either company to cover his debt payments. Redstone hasn't been particularly chatty in the recent earnings calls. He comes on to make a statement before Dauman comes on, and then he doesn't weigh in during the Q&A period.

So what's next for Viacom? Barclay's analyst Anthony DiClemente says the potential for share buybacks should improve, thanks to the strengthening of the company's balance sheet. After Viacom, we'll be looking ahead to Discovery Communications earnings after the bell, a strong cable story, and then Time Warner and Comcast Wednesday morning.

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