Viacom ( VIAB) posted a solid second quarter and shrugged off any major media merger talk. The New York media giant met second-quarter estimates, with growth in cable and television offsetting weakness in radio, outdoor, feature films and home video. Meanwhile, CEO Sumner Redstone reiterated the company's aversion to any big deals, saying it would stick to its knitting. "We intend to continue to capitalize on opportunities that present themselves," he said, noting recent minor acquisitions. "That said, we don't presently see the need to do any major deals. The company intends to resume its stock buyback program following our separation from Blockbuster." Results for the quarter, which saw Viacom President Mel Karmazin depart from the company, also reflect $56 million in severance charges. For the second quarter ended June 30, Viacom reported earnings of $754 million, or 43 cents per share, including a 2-cent charge due to management changes. That 43-cent figure, matching the consensus estimate of analysts surveyed by Thomson First Call, is up from the year-ago $660 million, or 37 cents a share. Revenue of $6.84 billion edged past the consensus of $6.81 billion for the quarter, and was up 7% from the second quarter of 2003. Operating income grew 10% to $1.45 billion, matching the First Call number. The company reiterated full-year guidance for growth in revenue, operating income and earnings per share, though it specified that guidance excludes the new severance charges. For the full year, Viacom has been forecasting revenue growth of 5% to 7%, operating income growth of 12% to 14% and earnings per share growth of 13% to 15%. Those numbers exclude a 2003 noncash charge related to Blockbuster and a 2004 federal tax audit benefit, and are clouded by the coming Blockbuster ( BBI) split-off.
"Once again our results were led by exceptional performances in our Cable Networks and Television segments which account for over 70% of the Company's operating income," CEO Redstone said in a statement. "We ... experienced strong increases in the television upfront advertising process, locking in higher rates and increased dollars, a performance which should benefit Viacom through at least the third quarter of 2005. The second quarter also benefited from top line increases in every business unit, paced by an 11% increase in overall advertising revenues." Viacom's Cable Networks segment showed operating income growth of 23% to $608 million, reflecting such factors as 26% advertising growth and lower restructuring charges than those posted a year ago. Operating income for the TV segment, including the CBS and UPN networks and stations, grew 35% to $528 million, on 11% revenue growth. Radio stations revenue grew 2%, while operating income of $267 million remained flat. Karmazin, according to Viacom, left the company partly out of frustration with the performance of the radio segment. Entertainment revenue, which includes Paramount Pictures, theme parks and other properties, saw a 6% decline in operating income to $68 million. Features revenue fell from the second quarter of 2003. Operating income at Blockbuster, the video retailer Viacom is planning to spin off in an exchange offer, dropped 28% to $76 million. Worldwide same store revenues fell 4.4%. Viacom hasn't yet set the exact terms under which shareholders will be able to trade Viacom stock for Blockbuster stock. Shares in Viacom, which have slid over the past year, fell 17 cents Wednesday to close at $33.60. Viacom's stock has been performing noticeably worse than big-media brethren Time Warner ( TWX) and Disney ( DIS).