What happened

Shares of ViacomCBS (NASDAQ:VIAC) (NASDAQ:VIAC.A) fell as much as 18.4% on Thursday morning, hamstrung by a disappointing fourth-quarter earnings report. By 12:20 p.m., EST, the company's Class A shares were trading 14.4% lower while the Class B ticker showed a drop of 16.2%.

So what

The media conglomerate (formed on Dec. 4, 2019, when CBS and Viacom reunited in a $12 billion merger after 14 years apart) posted $0.97 of adjusted earnings per share on revenues of $6.87 billion. The analyst community had been looking for earnings near $1.44 per share and sales in the neighborhood of $7.36 billion. The weakness was broadly distributed across nearly all ViacomCBS' operating divisions, from a 1% year-over-year decline in publishing to a 13% top-line drop in the theatrical content segment. The sole outlier was the TV affiliate group, where sales rose by 1%.

Two teenagers aslpee in an otherwise empty movie theater.

Image source: Getty Images.

Now what

It's true that ViacomCBS saw $1.1 billion of merger-related expenses in the fourth quarter, but those costs can't explain the combined company's weak revenues, and they were already backed out of the adjusted earnings figures. As separate companies, both Viacom and CBS have struggled to adapt as the entertainment industry shifts further and further into the digital streaming paradigm, and the struggle continues in the postmerger era as well. Management is now placing a heavy focus on streaming platforms, led by Showtime's premium service and the ad-supported Pluto TV and CBS All Access products.

Heading into this report, ViacomCBS' two stock classes had fallen roughly 10% each since the merger. Today, the Class A and Class B stocks are down by a total of 22% and 24%, respectively. The merger is not off to an auspicious start, and I don't see this drop as a buying opportunity. That may come in the future, but the company needs to work out its merger-related kinks first.