Stock Picks: Intel, Time Warner, Viacom

(page 2 of 2)

Time Warner raised its full-year forecast. Adjusted earnings from continuing operations in 2010 will gain at least 20 percent from $1.83 a share last year. That compares with a May forecast of an increase by a percentage "at least in the mid-teens." Analysts project earnings of $2.22, the average of estimates compiled by Bloomberg, implying growth of 21 percent.

Second-quarter net income gained 7.3 percent, to $562 million, or 49¢ cents a share, from $524 million, or 44¢ cents. Sales rose 7.7 percent, to $6.38 billion, compared with the $6.22 billion average estimate.

In a note, Wible said Time Warner posted "respectable" results for the quarter, with reported earnings per share (EPS) in line with his estimate.

"The positives overwhelmed the negatives this quarter," he said, noting record audiences for HBO, improvements in ad rates for cable networks, and early benefits to DVD sales from the company's strategy of delaying film rentals through Netflix (NFLX) and Coinstar's (CSTR) Redbox.

"Overall, we believe the results support our view that the value of content will increase as distribution becomes a commodity," he wrote.

Viacom: Standard & Poor's equity analyst Tuna Amobi kept a buy rating on the Class B shares of Viacom (VIA/B) on Aug. 5.

Viacom, the owner of MTV Networks and the Paramount Pictures film studio, said on Aug. 5 that profit rose 52 percent as cable television advertising sales climbed.

Net income increased to $420 million, or 69¢ a share, in the quarter ended June 30, from $277 million, or 46¢, a year ago, the New York company said in a statement. Excluding some items, profit of 68¢ beat the 66¢ average of analysts' estimates compiled by Bloomberg.

Sales were little changed at $3.3 billion, compared with the $3.47 billion average of 20 estimates compiled by Bloomberg.

Cable TV advertising sales increased after viewership bounced back earlier in the year at Viacom's flagship MTV network, with shows like Jersey Shore, and the Nickelodeon kids' channel. The company is also working to return cash to stockholders, announcing in June it would pay a dividend for the first time and buy back as much as $4 billion in stock amid the advertising recovery.

Ad revenue in the U.S. climbed 4 percent for cable channels, including BET and VH1. Revenue from the cable networks rose 6.4 percent, to $2.09 billion, and operating income gained 14 percent, to $789 million. Film revenue fell 9.8 percent, to $1.25 billion, dragged down by a 43 percent decline in home entertainment sales because of fewer DVD releases. The unit reported a $69 million operating profit, up from a year-ago loss, because of lower release costs.

In a posting on the S&P MarketScope service, Amobi said Viacom's EPS from continuing operations were 11¢ above his estimate. "We think this mainly reflected strong growth in worldwide affiliate revenues against tough film [comparisons vs. a year earlier]," he wrote. Amobi said domestic advertising growth of 4 percent was "surprising;" he expects increased benefits in 2010 from MTV's upfront advertising sales and a "strong" market for so-called scatter ads, those sold closer to air date.

"A recent strategic shift toward software (vs. hardware) also seems to be stemming losses on Rock Band video games, even as VIA.B pushes further into social gaming," he said.

Amobi said the company's new dividend policy and share buyback plan "should address capital allocation questions."

Business Exchange

Track and share business topics across the Web.