On August 3, Viacom reported earnings in an adjusted $1.17 per share in its most recent quarter, 12 cents more than Wall Street analysts expected. Revenue was $3.36 billion while analysts were looking for $3.29 billion. In the last quarter, Viacom slashed analysts’ expectations and the company celebrated.
However, enthusiasm over Viacom’s better-than-expected quarter lasted only about 10 minutes. On August 4, the company’s shares plunged 14%, wiping out nearly $2 billion in market cap.
Wall Street analysts were shocked upon learning that Viacom still hadn’t received a June payment from China partner Huahua Media, which is in a $1 billion film-financing deal with Paramount. CFO Wade Davis minimized the development by noting Viacom has “been in business with Huahua for a long time, and they have and continue to be a valuable strategic, operational and financial partner.”
Another factor that accelerated the stock was Viacom’s acknowledgement that a dispute with Charter Communications hadn’t been settled. In March, Charter took several Viacom TV channels — MTV, Comedy Central, Nickelodeon — off its basic package and moved to a higher-priced tier for new subscribers. It also created a bundle without Viacom or sports entirely, and Viacom claimed such moves violate a carriage deal.
“I don’t fundamentally believe suing big customers is the way to solve problems,” Davis told Wall Street. Though Viacom may have to do just that in order to keep its profits coming.
On Friday, Viacom shares sunk $4.85 to $30.22, leaving it with a market cap of about $14.8 billion.