NEW YORK (TheStreet) -- Shares of Viacom (VIAB) are advancing 1.76% to $67.25 in Wednesday's early morning trading session as analysts at Credit Suisse initiated coverage of the company with an "outperform" rating and a price target of $85.
The firm pointed out that the entertainment content company has been at the epicenter of investor debate about the future of the bundle, which has caused significant multiple compression. However, analysts see recovery potential and believe the risks of near-term disruption to the company's business are modest.
While the core cable networks face some structural challenges, which are now well-known, ratings could stabilize in the second half of 2015, analysts noted.
Additionally, their forecasts include successful cost savings realization with limited topline impact from the announced restructuring program.
Separately, TheStreet Ratings team rates VIACOM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate VIACOM INC (VIAB) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Media industry and the overall market, VIACOM INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $624.00 million or 20.00% when compared to the same quarter last year. In addition, VIACOM INC has also modestly surpassed the industry average cash flow growth rate of 15.23%.
- VIACOM INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, VIACOM INC increased its bottom line by earning $5.45 versus $4.90 in the prior year. This year, the market expects an improvement in earnings ($11.85 versus $5.45).
- Although VIAB's debt-to-equity ratio of 5.74 is very high, it is currently less than that of the industry average. Along with the unfavorable debt-to-equity ratio, VIAB maintains a poor quick ratio of 0.86, which illustrates the inability to avoid short-term cash problems.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Media industry. The net income has significantly decreased by 110.6% when compared to the same quarter one year ago, falling from $502.00 million to -$53.00 million.
- You can view the full analysis from the report here: VIAB Ratings Report