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Why Did Viacom’s Stock Price Fall so Steeply?

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Stock price takes a nosedive

Viacom (VIAB) reported its fiscal 1Q16 results on February 9, 2016. The company reported revenues of $3.2 billion, a decline of 6% over fiscal 1Q15. The company’s revenues fell slightly short of consensus Wall Street analysts’ estimates of $3.3 billion.

The company recorded net income of $449 million, a decline of 10% over 1Q15. Viacom announced adjusted diluted EPS (earnings per share) of $1.18 per share, which was in line with consensus Wall Street analysts’ expectations. However, the adjusted diluted EPS fell 9% versus adjusted diluted EPS of $1.29 in 1Q15.

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After the results came out, the company’s share price fell 21.5% on February 9, 2016. Viacom’s share price has fallen 23.8% in its year-to-date performance. Viacom has been mired in problems. Former chairman and founder Sumner Redstone reportedly was in ill health, and the new executive chairman, president, and CEO, Philippe Dauman, has faced criticism.

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Viacom’s stock price against its peers’

The Walt Disney Company (DIS) also announced its 4Q15 and fiscal 2015 results on February 9. Its share price rose 0.2% on February 9, but it’s fallen 12.1% year-to-date. Another Viacom peer, CBS (CBS), has seen its stock price fall only 9.5% year-to-date. Viacom’s founder and chairman emeritus, Sumner Redstone, also holds an 80% share in CBS through a private company, National Amusements.

Philippe Dauman refutes the criticism

On January 19, activist shareholder SpringOwl Asset Management’s managing director, Eric Jackson, suggested in a presentation on LinkedIn (LNKD) that Viacom’s leadership should be replaced.

Dauman referred to the criticism at the company’s fiscal 1Q16 earnings call. He stated that, “Our outlook and the facts have been distorted and obscured by the naysayers, self-interested critics and publicity. We will not be distracted or deterred as we built for the bright future ahead of us. And finally let me be absolutely clear, I could not be more focused on getting Viacom stock price back to the much higher level and enjoy my leadership toward short time ago. No one should doubt my resolve or the resolve of our entire management team to making that happen.”

In the next part of this series, we’ll look at Viacom’s deal with Snapchat.

Viacom accounts for 0.27% of the PowerShares QQQ Trust Series 1 ETF (QQQ). If you’re interested in exposure to the television sector, note that QQQ has 4.4% exposure to the sector.

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