Viacom stox hit as forecasts revised
Advertising woes, syndication slump weigh on company
Shares fell 3.4% to $38.55, lagging other showbiz congloms. Of the group, Viacom is the most exposed to advertising, which makes up half of its revenue.
Citing the "Iraqi impact," analyst Spencer Wang of JPMorgan estimated cash flow will grow by 10% in the current quarter to $1.2 billion --instead of $1.24 billion.
With a slower first quarter and tough comparisons from last year, Viacom will have to fire on all cylinders in the second half to meet its full-year, double-digit growth target. Wang sees 2003 cash flow up 9% at $6 billion.
Ray Katz of Bear Stearns ratcheted down his cash flow forecasts to 8.5% growth for the quarter and 11% for the year.
Ad pullback, preemptions
Wang said the conflict with Iraq had a two-fold impact on advertising so far, with prewar jitters that created an ad pullback in March followed by preemptions and lost advertising since the war started.
Katz said local advertising in particular has been weaker than expected this month and that CBS and Viacom's syndication biz may be taking a hit due to continued news preemptions. He noted the NCAA ratings are down 23% on average thus far and said that shifting some of the NCAA games to ESPN leads to a loss of revenue at the TV stations.
Alongside its TV networks and stations, Viacom has a giant radio and outdoor advertising presence through Infinity.
Long war, sore ad revs
While the war hasn't yet proved to be the body blow for media that some anticipated, the longer it drags on, the more it will eat into ad revenue.
Some Wall Streeters are bracing for lowered expectations. Walt Disney said last week that war and economic jitters are hitting its theme parks and consumer products.
Also, last week, Viacom and chairman-CEO Sumner Redstone inked a new three-year contract with chief operating officer Mel Karmazin.
