Nathanson Lowers Rating On Viacom Shares

Better ratings, strong ad market not enough to lift stock
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Analyst Michael Nathanson of MofftettNathanson Research on Monday downgraded shares of Viacom to neutral from buy.

In a report entitled “A Deep Dive into the Bottom of an Empty Pool,” Nathanson says the old assumption under which he’d been recommending the stock no longer seem to apply and that improving ratings at Viacom’s cable networks and a stronger ad market won’t create positive earnings revisions.

“Going forward, Viacom’s two most dependable EPS drivers—affiliate fee growth and share repurchases—can no longer be counted on to generate the double-digit EPS growth of prior years,” Nathanson wrote. “As such, we model flat EPS growth over the next three years.”

Nathanson lowered his estimates for Viacom earnings for the current quarter  by 21 cents a share to 73 cents.

“The biggest risk to our downside is M&A likely as a result of leadership change at [National Amusements], “the company that holds 92-year-old Sumner Redstone’s controlling interest in both Viacom and CBS.

Viacom shares were down 1.75% to $40.45 in Monday morning trading.

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