Viacom CEO Philippe Dauman disappointed Wall Street with comments at a Goldman Sachs conference indicating that fiscal Q4 (July-September) ad revenues will be up by only a “high single-digit” percentage. As a result, Barclays Capital analyst Anthony DiClemente has pulled back on his estimates.
“In his remarks, the CEO mentioned that domestic ad revenue growth was likely going to be up in the high single digits, down from prior double-digit guidance, given ratings weakness at certain networks. While the macro environment may also have played some part in the reduced ad growth outlook, we believe scatter demand still remains strong and that network ad revenues should benefit as ratings start to improve and upfront dollars are booked beginning in F1Q ’12. We are maintaining our 1-Overweight rating on VIAB and price target of $57,” DiClemente said in a note Friday (9/30).
Despite more modest expectations for ad growth in fiscal Q4, DiClemente noted that Dauman emphasized that scatter market pricing continues to be strong, up in the teens over this year’s upfront. “We expect the positive momentum to continue into F1Q [calendar Q4], which is already getting the benefit of double-digit pricing increases from upfront sales this past May,” the analyst said.
“On account of slower domestic ad growth, we are trimming our F4Q EPS estimate to $1.04 from $1.06, while our FY 2012 EPS estimate of $4.20 remains unchanged. We expect VIAB shareholders will continue to benefit from additional digital distribution deals, ongoing scatter market strength, and impressive return of capital initiatives. Our $57 target implies a FY 2012 P/FCF multiple of 12.0x and a FY 2012 P/E multiple of 13.3x,” DiClemente concluded.