Viacom Stock Plunges on Loss Forecast

Viacom Inc. shares fell 9.4% on Wednesday after an analyst said the company’s first-quarter loss will be bigger than she expected and that its stock isn’t likely to rise in the next two quarters.

Class A shares of the owner of the MTV cable channel and publisher Simon & Schuster fell $3.375 to $32.50 in trading of 393,000 shares, more than triple the three-month daily average of 120,100 shares. Viacom’s warrants also declined in heavy trading.

Merrill Lynch & Co. analyst Jessica Reif changed her first-quarter estimate to a loss of 13 cents from a loss of 2 cents because of weak cash flow from films and problems at its Blockbuster Entertainment Group unit.

The average loss estimate of nine analysts surveyed by IBES International Inc was 7 cents a share. In the year-earlier quarter, Viacom had net income of $27.8 million, or 3 cents a share, on revenue of $2.79 billion.

Reif also lowered her rating on the company to medium-term “neutral” from medium-term “accumulate.” She said Viacom’s shares, which have fallen about 23% since May, won’t rise for two more quarters unless Viacom sells some assets.

“The only catalysts for near-term price appreciation are divestitures such as the sale of USA Network or a spinoff/sale of publishing,” she said.

Reif changed her estimate because she expects first-quarter cash flow of $390 million, down from $448 million in the year-earlier quarter. She earlier had forecast cash flow of $413 million. Cash flow is earnings before interest, taxes, depreciation and amortization.

Blockbuster, which sells and rents videos and music, had flat first-quarter sales at stores open at least a year, known as same-store sales. The unit’s profit margins aren’t expected to improve until the second half of the year, hurt by higher marketing costs and other problems, Reif said.