Zacks Analyst Blog Highlights: Viacom, Time Warner, News, CBS and Hologic

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Feb 15, 2011, 09:30 ET

CHICAGO, Feb. 15, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Viacom Inc. (NYSE: VIA.B), Time Warner Inc. (NYSE: TWX), News Corp. (Nasdaq: NWSA), CBS Corp. (NYSE: CBS) and Hologic (Nasdaq: HOLX).

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Here are highlights from Monday's Analyst Blog:

Earnings Scorecard: Viacom

Viacom Inc. (NYSE: VIA.B) reported mixed financial results for the first quarter of fiscal 2011. While earnings per share (EPS) beat the Zacks Consensus Estimates, revenues fell well short of it. This was primarily due to extremely weak sales of DVD and lack of successful movie releases at the Hollywood box office. Meanwhile, strong viewership ratings for Viacom's cable channels resulted in higher advertising revenue.

First Quarter Highlights

Net income from continuing operation was $620 million or $1.02 per share compared with a net income of $693 million or $1.14 per share in the prior-year quarter. However, EPS of $1.02 surpassed the Zacks Consensus Estimate of 99 cents.

Total revenue was $3,828 million, down 5% year over year. This was well below the Zacks Consensus Estimate of $4,139 million. Significant decline in the top line was primarily blamed on extremely poor Home Entertainment business.

Quarterly operating income was $1,040 million, down 13% year over year, due to lower profit from the Film Entertainment segment.

Agreements of Analysts

Of the 24 analysts covering the stock in last 7 days, only 1 analyst downwardly revised its estimate for the ensuing second quarter fiscal 2011 while 5 analysts revised their estimate upward for the same period.

For fiscal 2011, out of 26 analysts, 9 revised their estimates upward, while none of the analysts revised their estimate downward. For fiscal 2012, out of 21 analysts, 8 revised their estimate upwardly, but no one moved in the opposite direction.

We believe the positive sentiment results from higher advertising revenue and affiliate fees. Several enterprises are raising their advertisement budgets. This in turn is benefiting the media industry and Viacom is no exception.

The company enjoys strong brand value with respect to its several cable TV channels. Viacom is generating solid revenue from affiliate fees it charges cable TV providers to carry its channels. Furthermore, movies like Avengers, Transformers 3 and Kung Fu Panda 2, which are slated to be released in the upcoming quarters will drive the Theatrical revenues to a new high.

Currently, the Zacks Consensus EPS Estimate for the second quarter of fiscal 2011 is pegged at 59 cents. The projected annual growth is 47.92%. Similarly, for the third quarter, the Zacks Consensus EPS Estimate of 81 cents indicates a gain of 18.73% year over year.

Magnitude of Estimate Revisions

In synergy with the strong upward revision of estimates recently, the Zacks Consensus Estimate inched up 1 cent from 58 cents to 59 cents, during the last 7 days, for the second quarter 2011.

For fiscal 2011, the Zacks Consensus Estimate increased 4 cents from $3.32 to $3.36, in the last 7 days. Similarly, for fiscal 2012, the Zacks Consensus Estimate upped 5 cents, from $3.77 to $3.82.

Earnings Surprises

With respect to earnings surprises, the company's fairly good track record is expected to persist in the coming quarters. VIA.B produced an earnings surprise of 3 cents or 3.03% in the last quarter.

The current Zacks Consensus Estimates for both the ongoing quarter and the upcoming quarter contains 3.39% and 3.7% upside potential (essentially a proxy for future earnings surprises), respectively, while for fiscal 2011 and fiscal 2012 Zacks Consensus Estimates upside potentials are 2.38% and 1.57%, respectively.

Our Recommendation

Viacom benefits from a well-balanced asset mix with entertainment content at its core. The company enhanced its brands worldwide through the creation and acquisition of hit programming, new channels, successful motion pictures and other forms of entertainment, including video game offerings.

An improving economic outlook, together with Viacom's disciplined management team continue to make us optimistic about the company's future growth prospects.

We believe an improving U.S. economy and strong rating for the cable TV channels will enable Viacom to maintain profitability in the long run. Prudent cost control in the Paramount Pictures reduces its operating losses.

On the other side, Home Entertainment Businesses continue to face sales decline primarily due to a massive drop in DVD sales. Similarly, Theatrical revenue segment also had a tepid performance due to lack of successful movie releases at the Hollywood box office. Viacom competes with other media companies such as Time Warner Inc. (NYSE: TWX), News Corp. (Nasdaq: NWSA), and CBS Corp. (NYSE: CBS).

We thus maintain our long-term Neutral recommendation for Viacom. Currently, Viacom has a Zacks #2 Rank, implying a short-term Buy rating on the stock.

Good News for Hologic

In a major breakthrough, Hologic (Nasdaq: HOLX) has received approval from the US Food and Drug Administration (FDA) for its Selenia Dimensions three-dimensional (3D) digital mammography tomosynthesis system.

Selenia has been developed on the Dimensions platform utilizing tomosynthesis technology to produce both 3D and the conventional two dimensional (2D) full field digital mammography (FFDM) images. The images can be used to screen and diagnose breast cancer.

Selenia had received CE mark approval in Europe in fiscal 2008 and Canadian registration in March 2009, both for 2D and 3D modes of imaging. The device is also available in several countries of Latin America and Asia.

The 3-D images may help doctors to more accurately detect and diagnose breast cancer. Although a patient's exposure to radiation would increase, the accuracy of detection of the disease is better for a combination of both 2-D and 3-D images. However, the FDA is uncertain about radiation risk estimates.

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