With strong box office returns for Teenage Mutant Ninja Turtles helping birth what looks like another new franchise, Viacom (NASDAQ:VIAB) stock is looking good right now. What's the future have in store? What catalysts can investors expect? Here's some of what management had to say in the most recent earnings conference call, held Aug. 6.
Viacom is in a giving mood
We'll see more share repurchases, even if their value to shareholders is debatable at this point. (Last quarter, Viacom repurchased stock at an average price of $85 a share -- below where it is now.) CEO Philippe Dauman nevertheless wants you to know he's in a giving mood:
... we remain steadfast in our commitment to returning substantial capital to our shareholders. In the June quarter, we repurchased $850 million in stock under our ongoing stock repurchase program. In the current quarter, we plan to repurchase another $850 million in stock, and expect our buyback for the September-ending fiscal year to total $3.4 billion. Including dividends, we will have returned nearly $4 billion in capital to our shareholders by the close of fiscal 2014.
Sounds great, right? Cash returns usually are. The better news is that Dauman and his team excel at producing returns on Viacom's assets, which fund these payouts. Viacom's returns on capital have ranged near or above 15% -- an outstanding number -- in each of the last two fiscal years and the trailing 12 months. (Source: S&P Capital IQ.)
Social media and creative marketing will help to fill gaps
Viacom faced a challenging sales environment during the most recent "upfront" meetings with major advertisers. In response, Dauman says the company is employing different techniques to boost engagement and grow its revenue base:
Our new Viacom Velocity Integrated Marketing unit has driven tremendous business for us this year as it develops more and more custom campaigns and content for advertisers and connects advertisers to our huge social media footprint and wealth of data and insights on our audiences. These programs will only grow in importance.
Think of it as a franchise-building think tank, whereby ad sales connect not just to a single show but a whole series of related properties. AdWeek has more details here.
Nickelodeon could be a catalyst
Just as Walt Disney (NYSE:DIS) is betting bigger on kids programming with Disney XD -- including the forthcoming animated series Star Wars: Rebels -- Viacom is making bigger investments in Nickelodeon. Says Dauman:
As we move forward, we're consistently investing in original content, and bringing more and more new programming to air. Nickelodeon has a torrent of new programming for us coming, including 9 new shows launching from the current quarter through the first quarter of calendar 2015, including the premiere of Dora and Friends this month and new live action series Henry Danger and Nicky, Ricky, Dicky & Dawn in September.
... In the period through the critical back-to-school and [pre-holiday] Hard Eight selling seasons, Nickelodeon has 12 straight weeks of premieres, many of which are returning hit series that powered the network to substantial gains last fall, including Sanjay and Craig, and Teenage Mutant Ninja Turtles.
Viewers are tuning in, but in different ways
A shift to the C7 standard could be a boon for Viacom, which has several programs that do very well among those who prefer to watch later. Says Dauman:
Across Viacom's networks, total video consumption of our full episode programming has grown year-over-year, with a number of our series seeing dramatic lift when you factor in time-shifted and on-demand viewing. Take MTV's Teen Wolf for example, a show with a very tech-savvy audience, an entire online and social media culture onto itself. Live-plus-same-day ratings for the just-completed cycle of Teen Wolf were up 18% among all viewers over the show's debut season in 2011. But when you factor in all measured screens, the total audience of the show is up 38% over the same time frame.
For those who don't know, C7 is more comprehensive in that it measures seven full days of live and delayed viewing in order to determine reach and value to advertisers. Genre programs such as Teen Wolf tend to do well among on-demand viewers.
Transformers: Age of Extinction was huge, but its impact won't be felt till the fourth quarter
As good as Teenage Mutant Ninja Turtles appears to be doing, it's Transformers: Age of Extinction that's driving results at the Paramount Pictures division, which typically accounts for about a third of revenue and a sliver of operating profit. Says Dauman:
... The big story at Paramount Pictures is the biggest movie of the year thus far, Transformers: Age of Extinction, which recently surpassed $1 billion at the worldwide box office. The film now stands as the highest-grossing theatrical release of all time in China, a crowning achievement in its phenomenal international run. Paramount announced last week that it has extended its first-look deal with filmmaker, Michael Bay, the visionary behind the multibillion-dollar Transformers franchise and many of the most popular films of the last quarter century.
CFO Wade Davis went further, explaining that Age of Extinction came to life after the quarter closed on June 30:
Theatrical revenues decreased 43% [in the most recent quarter], reflecting the number and timing of titles in the quarter. We released Transformers: Age of Extinction at the end of the June quarter, while we released Star Trek Into Darkness, World War Z and Pain & Gain in last year's June quarter.