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Cable Networks Boost Viacom 4th Quarter Profit

UPDATED: Ad revenues increase by 10% 11/14/2013 09:34:30 AM Eastern

UPDATED: 10:04 p.m. ET

Viacom said earnings rose in the fourth quarter as revenues went up at its cable networks.

Net earnings were $804 million, or $1.68 a share, compared to $650 million, or $1.26 a share a year ago.

Revenues increased 9% to $3.7 billion.

"Viacom's commitment to creative and operational excellence, and our continued investment in content, delivered an outstanding quarter and strong fiscal year," Philippe Dauman, president and CEO, said in a statement. "Our media networks had strong growth in both advertising and affiliate revenues as ratings improved across our brands."

Operating income for Viacom's Media Networks segment, which includes MTV, Nickelodeon and Comedy Central, rose 11% to $933 million in the quarter. The company said higher revenues offset a 6% increase in spending on programming.

Media Networks revenues grew 7% to $2.46 billion in the quarter. Domestic and worldwide advertising revenues each increased 10%. A year ago, when Nickeldeon's ratings were in free fall, domestic ad revenues fell 6%. Worldwide ad revenues were down 7%.

Domestic and worldwide affiliate revenues increased by 6%. Excluding digital distribution, Viacom said affiliate revenues were up in the high single digits.

During the company's conference call with analysts, Dauman said that "we invested more than ever in programming to fuel new hits." The effort paid off. "We made particular progress in growing ratings in those demos and dayparts where the opportunity for monetization is the greatest," he said.

For the current quarter, Dauman said ad sales growth will be less spectacular. "We currently anticipate mid-single-digit growth in ad sales for the quarter. This will lay the foundation for significant improvement in full year ad sales growth," he said. Some retail advertising that had been scheduled to run in the fourth quarter ran instead in September, affecting the quarterly results.

As price increases from the upfront kick in and new programming rolls out, Dauman said ad growth could accelerate during the year.

"Overall we see a healthy marketplace and we are very optimistic. Obviously we are counting on the economy, the general economy to continue its recovery, if the recovery accelerates that will also be good," Dauman said.

Viacom said it bought back 33.7 million shares of its stock for $2.7 billion and plans to buy $3 billion in fiscal 2014.

Analyst Marci Ryvicker of Wells Fargo said Viacom's revenue and operating income exceeded estimates. "The big surprise here was the acceleration of domestic (and international) network advertising to 10% each," she said. Film results also topped expectations.

"There were two positive takeaways from today's release — accelerated advertising and a strong buyback," Ryvicker said.

Todd Juenger of Sanford C. Bernstein thought that Viacom's strong quarterly results for the quarter would help the media sector's stocks. But he was unsure that Viacom could maintain its upward momentum. "The obvious question is what happens to ratings and ad revenue as comps get harder in the coming," he said in a research notes. "We remain highly skeptical of the business trajectory going forward."

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