"VIA-B (NYSE: VIA.B), the cable, movie and video game empire of longtime chairman Sumner Redstone, is a solid media stock that we think can be accumulated on dips," suggests Geoffrey Seiler.
In his always-excellent BullMarket.com, he looks to the upcoming release of Star Trek and the new Beatles-based music video game as potential catalysts for improved results. Here's his update.
"Viacom, which spun off CBS in 2007, describes itself as an entertainment content company that operates in two segments: Media Networks and Filmed Entertainment.
"The company owns Paramount Pictures, and its cable brands include MTV, VH1, CMT, Logo, Nickelodeon, Nick at Nite, Noggin, Comedy Central, Spike TV, TV Land, and BET. Digital game properties include Rock Band, AddictingGames, Atom, Neopets, and Shockwave.
"The company offers approximately 170 channels and 400 online properties in 163 countries and territories.
"As with other media companies, sluggish ad spending led to declines in revenues and profits during the first half of the year, though the trend was improving as the year went on.
"Viacom will release Star Trek and other movies for home video in time for the holiday shopping season. In addition, the music video game division is expected to get a big boost in September, however, when the company releases The Beatles Rock Band edition.
"Separately, Viacom also announced a deal was struck for distribution of Epix, a new cable channel Paramount co-owns along with Lions Gate Entertainment and MGM.
"Verizon has agreed to carry the channel on its FiOS service. Viacom hopes Epix will compete with Time Warner's HBO and CBS' Showtime.
"Viacom also has been working to improve its balance sheet. It ended the quarter with $7.4 billion of debt and approximately $250 million in cash.
"The company had drawn $750 million on its $3.25 billion bank revolver. It used cash on the balance sheet and unused capacity under the bank line to repay $690 million of our floating-rate notes that were outstanding at their maturity on June 16th.
"Viacom's shares have been moving steadily higher since trading around $13.50 in early March. As with other media stocks, the recent surge is based more on optimism than it is on actual results to date.
"As with others in the industry the company is riding out the advertising slump by cutting costs. Viacom has a solid stable of cable properties that we expect will perform well when the advertising market picks up.
"We also expect the Fab Four edition of Rock Band will be a big seller heading into the holiday season, but it will be interesting to see how it matches up against previous versions sold when Americans were less tight-fisted than they are now.
"The movie business is always going to be a lumpy; a big blockbuster can really juice revenues and profits, but expensive clunkers can have the opposite effect, and predicting which will happen is very difficult.
"Overall, Viacom is a solid media stock that we think can be accumulated on dips. We would note that Viacom also trades a class A share, but the B shares are the more liquid issue."