Market Overview

Viacom: Dividend Cuts And CEO Exit Leave Investors Anxious

Viacom: Dividend Cuts And CEO Exit Leave Investors Anxious
Related VIAB
'Convergence' Is Key: Credit Suisse Weighs In On The Telecom And Media Sector
Survey: More Than One-Third Of Millennials Prefer To Watch Netflix On TV Over Cable

Viacom, Inc. (NASDAQ: VIAB) left investors more anxious after the media company cut its dividend and fourth quarter earnings guidance, and announced the exit of interim CEO Tom Dooley.

The company slashed its quarterly dividend in half, from $0.40 to $0.20, which will save about $80 million per quarter. The dividend cut was expected as the previous yield of 4.3 percent was approximately double that of its closest peer.

Management Changes

Viacom also announced that Tom Dooley, interim president and CEO, will be resigning effective November 15, leaving Viacom to find another successor within the next seven weeks. The market was expecting Viacom to retain Dooley on a full-time basis.

Related Link: Here's What Jefferies Expects From Viacom's Strategic Plan

"Another management change at a delicate time for Viacom means someone experienced will need to be found quickly to take the reins," Macquarie analyst Tim Nollen wrote in a note.

"We think potential candidates mentioned in the press such as Jeffrey Katzenberg and Rob Marcus could bring outside experience and views in the cable networks and studio businesses but we don't see an obvious choice and the timeframe is very short," Nollen continued.

Estimates And A Look Ahead

Meanwhile, Viacom trimmed its fourth quarter adj. EPS outlook to $0.65–$0.70, or $0.55-$0.60 including severance, versus Macquarie's $0.88 estimate and the consensus' $0.89.

In addition, the company announced a debt raise in the near future to fund new content investment. Macquarie said the move will raise Viacom's net debt/EBITDA ratio from the current (and relatively high) 3.8x.

Nollen noted that Viacom should renew its focus on content development for survival, while its networks such as Nickelodeon, MTV, VH1, BET and Comedy Central need scripted content.

Since Viacom is not selling Paramount stake, Nollen said the studio should create franchise films that can be marketed globally, particularly in China.

Nollen, who has a Neutral rating on the shares, also suggested Viacom should consider an OTT service and shutting down its less penetrated networks.

"A competitively priced OTT service bundling cable content and the Paramount library could prove attractive over time but there could be a lot more disruption to the existing business to get there," Nollen highlighted.

The analyst cut his F2016 EPS view to $3.59 from $3.88 on both the impairment charge and cited severance costs. The analyst also reduced his target price to $35 from $44.

At time of writing, shares of Viacom were up 0.36 percent to $35.98.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for VIAB

Jul 2018Credit SuisseInitiates Coverage OnNeutral
Jun 2018Imperial CapitalInitiates Coverage OnUnderperform
Mar 2018CitigroupUpgradesSellNeutral

View More Analyst Ratings for VIAB
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings News Guidance Dividends Dividends Price Target Reiteration Best of Benzinga


Related Articles (VIAB)

View Comments and Join the Discussion!