Updated from 7:10 a.m. EDT

Viacom ( VIAB) shares rose 3% Thursday after the company pleasantly surprised analysts with better-than-expected revenue and earnings.

First-quarter advertising sales at the media and entertainment conglomerate grew by 21% over year-earlier results. Revenue growth was strongest at two key divisions, with cable networks up 21% and television up 18%.

The company reiterated its guidance for full 2004 financial performance.

"I'm extraordinarily optimistic about the remainder of '04," Viacom President Mel Karmazin said on a conferent call with analysts Thursday morning.

For the first quarter ended March 31, Viacom posted net income of $711 million, or 41 cents per share, up from $443 million, or 25 cents per share, one year earlier. The 2004 number includes the recognition of a tax benefit of $141 million stemming from the resolution of a tax audit covering 1997 through part of 2000; excluding that benefit, Viacom earned $570 million, or 33 cents per share. The Thomson First Call consensus forecast was for 31 cents a share.

The New York company reported $6.77 billion in revenue, up 12% from the $6.05 billion reported in the first quarter of 2003 and ahead of the consensus figure of $6.52 billion.

Operating income was up 20% to $1.18 billion, better than analysts' expectations of $1.08 billion.

At the company's cable networks, where operating income grew 24%, the $1.4 billion in first-quarter revenue was fueled by higher advertising fees and ancillary revenue. Cable networks ad sales grew by 33%, led by 35% growth at MTV Networks and 16% at BET. The licensing of Nickelodeon home video and consumer products pushed ancillary revenue up 25%.

TV revenue, which grew to $2.3 billion, was pushed by broadcasts of the Super Bowl, the NCAA Men's Basketball Championship and CBS primetime.

The dependably bullish Karmazin had encouraging words about the upfront selling season that is unfolding, when TV networks sell advertising time for the season starting in the approaching fall.

With CBS more than halfway through the upfront market for children's television programming, Karmazin said Viacom has "double-digit" pricing increases. Estimates are that the total volume of the cable upfront market will increase from 8% to 20% over last year, said Karmazin, and it's Viacom's belief that the growth will be at the high end of that range.

Revenue at the company's radio division, which disappointed Wall Street over the past year, grew 3% to $455 million. On the call, Karmazin predicted second quarter revenue growth of at least 5% and revenue growth in the third quarter -- when seasonal volume picks up -- of 7%. "There's no advertiser who's canceling radio to go anywhere else," Karmazin said.

Karmazin spent part of the time on the call talking about the long-term prospects for online advertising, a market in which the company participates through its operation of sites such as Nick.com and MTV.com. Though the company doesn't break out its online business separately, that reporting may change, Karmazin suggested.

Asked about expected long-term growth prospects for different advertising media, Karmazin said he thought all of the areas in which Viacom operated -- starting with online, cable, local TV and TV networks -- would grow faster than advertising in general. Yellow pages and newspaper advertising -- businesses in which Viacom doesn't participate -- will have "big problems," he said.

Karmazin criticized the Federal Communications Commission's current crackdown on indecency, saying the government was on a slippery slope of regulating speech in the media.

For the full year, Viacom reiterated revenue growth in the range of 5% to 7%, operating income up in the range of 12% to 14%, and earnings per share up between 13% and 15%. Those growth numbers exclude a $1.3 billion charge last year related to Viacom's Blockbuster ( BBI) subsidiary, which the company hopes to spin off later this year.

Analysts currently expect $28.23 billion in revenue for 2004, $6.6 billion of operating income before depreciation and amortization, $5.55 billion in operating income, and earnings per share of $1.63.

Viacom's shares rose $1.11 Thursday to trade at $42.09. Shares have bounced between $36.35 and $49.75 over the past year.