Updated from 4:27 p.m.
posted a strong second quarter Thursday.
For the quarter ended June 30, the New York media conglomerate earned $762 million, or 47 cents a share, from continuing operations. That's up from the year-ago $717 million, or 41 cents a share, and a penny ahead of the Wall Street analyst consensus estimate. Revenue rose to $5.88 billion from $5.35 billion a year earlier, easing past the $5.75 billion target of Thomson First Call.
Viacom cited revenue gains of 14% in cable networks and 24% in entertainment. Revenue from advertising climbed 6%.
Free cash flow fell to $889 million from $990 million a year ago, as higher earnings from continuing operations were more than offset by higher cash taxes and increases in capital expenditures.
The company reaffirmed its guidance for midsingle-digit growth in revenue and operating income, and high single-digit growth in earnings per share. The outlook excludes one-time charges associated with the planned spinoff.
The news comes as Viacom plans a breakup aimed at winning back investors frustrated by the poor performance of the company's stock. The new growth side will be refashioned into a Tom Freston-led Viacom company consisting of MTV Networks, Paramount Studios and a host of cable outlets and new-media enterprises. The Leslie Moonves-led CBS company is to include all CBS assets, along with the media company's outdoor advertising and radio units.
CEO Sumner Redstone spoke of two dynamic organizations. "You don't have to be a visionary to see that the media industry has changed dramatically over the past few years," Redstone during a postclose earnings call. He added that consolidation in the media business was necessary and positive, but that now "bulk will not assure success -- agility and innovation will separate the winners from the losers."
Redstone ventured that more nimble media enterprises will end up on top, saying, "In the 21st century, large is no longer in charge."
On Thursday, Redstone offered further details of the split plan, saying, "CBS Corporation will focus on generating higher dividend yields relative to its peers in the media industry. The new Viacom will not initially pay a dividend but will focus on using its free cash flow for organic growth, supplemented by complementary acquisitions in high growth areas, particularly in the digital and interactive space, as well as return value to stockholders through a significant share repurchase program."
According to Viacom's statement, CBS will start with a targeted adjusted debt to operating income before depreciation and amortization ratio in a range of 2.5 to 3. CBS expects to pay a regular dividend in line with Viacom's annual payout of approximately $450 million.
Meanwhile, the new Viacom is expected to have an initial targeted adjusted debt-to-OIBDA ratio of 1.75. After the spin-off, the intention is to increase new Viacom's targeted adjusted debt to OIBDA ratio to approximately 2.75.
CBS will focus on generating higher dividend yields relative to its peers in the media industry. The new Viacom will not initially pay a dividend but will focus on using its free cash flow for organic growth and future acquisitions.
"We like our odds of success and we think our shareholders should also like our odds," Redstone said.