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Viacom posts higher fourth quarter revenues on strong ad growth

By Liana B. Baker

(Reuters) - Viacom Inc reported a nearly 9 percent rise in fiscal fourth-quarter revenue on Thursday, driven by strong advertising growth at its cable networks and improved television ratings, but forecast weaker ad performance in the current quarter.

While advertising performed well in the quarter, Chief Executive Philippe Dauman looked for advertising growth to be weaker sequentially. He said on a conference call that growth would be increase in the mid single digits in the fiscal first quarter.

The advertising outlook may have disappointed investors, said Gabelli & Co analyst Brett Harriss, as shares fell 2.1 percent after rising in premarket trading.

"That would be a deceleration from this quarter, where advertising was up 10 percent," he said.

Dauman blamed the weaker ad outlook on advertisers such as retailers that spent money on commercials earlier in the fall.

Bernstein analyst Todd Juenger also was skeptical that Viacom could sustain the ratings growth, and said Viacom's networks still have "excessive reliance on too few hit programs."

"The obvious question is what happens to ratings and ad revenue as comparisons get harder in the coming quarters?" he wrote in a research note to investors.

The company, which owns cable networks MTV and Comedy Central and the movie studio Paramount Pictures, said "positive ratings trends" propelled domestic and global advertising revenues both increased 10 percent in the quarter.

TV ads rates are closely aligned with ratings. The more people who watch a show like "SpongeBob SquarePants," which appears on its juggernaut Nickelodeon kids cable channel, the more money a network can get for a commercial.

Earlier this year, Viacom struggled with ratings, especially on Nickelodeon, but it was able to turn the network around with a revamped program lineup in recent quarters.

Analysts noted that ratings at Viacom's Nickelodeon, MTV, Spike, BET and Comedy Central networks all increased in the quarter.

Pivotal Research Group analyst Brian Wieser said the advertising bump beat his estimate of 6 percent.

"Advertising revenue was well ahead of expectations" which is a good sign, Wieser said, because advertising is one of the most important metrics on which Viacom investors focus.

For the same quarter, rival cable network Discovery Communications Inc reported a 12 percent gain in advertising, while Time Warner Inc said advertising for its cable networks was up 11 percent.

Wieser added that Thursday's results helped to alleviate "the fears that kids were gravitating away from TV and that advertisers would follow suit."

REVENUE TOPS ESTIMATES

Viacom posted total revenue of $3.65 billion, compared with $3.363 billion a year ago. Analysts expected $3.6 billion, according to Thomson Reuters I/B/E/S.

Revenue at the filmed entertainment unit increased 11 percent to $1.21 billion, driven by zombie movie "World War Z" and "Star Trek Into the Darkness," which both did well when they hit the home release market.

Viacom net income totaled $804 million, or $1.68 per share, compared with $650 million, or $1.26 per share, a year ago.

Adjusted for items such as restructuring, diluted EPS from continuing operations was $1.55, which beat Wall Street estimates by 11 cents.

The stock fell $1.74 to $81.39 on the Nasdaq.

(Editing by Jeffrey Benkoe)

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