Viacom’s Profit Declines in 2nd Quarter

Viacom Inc., the world’s third-largest media company, said its second-quarter profit fell because of goodwill expenses for its $50-billion purchase of CBS Corp.

Profit from operations fell to $9 million, or 1 cent a share, from net income of $59.3 million, or 8 cents, a year ago. Last year’s figures don’t include CBS. Viacom had $3 billion in goodwill costs this quarter. Cash flow, often used to gauge media company performance, rose 18% on higher advertising sales.

Viacom was forecast to lose 5 cents a share, the average estimate of four analysts polled by First Call/Thomson Financial.

Viacom’s widely traded Class A shares rose $2.19 to close at $71.56 in Thursday’s trading on the New York Stock Exchange.

Viacom’s TV business drove the growth as the new series “Survivor” attracted a bigger audience to CBS and persuaded advertisers to spend more money across the network’s entire prime-time schedule. Ad sales growth also lifted results at Viacom’s cable-TV networks such as MTV and CBS’ radio and TV stations. “Mission: Impossible 2,” which has sold $430 million of tickets worldwide so far, helped boost film results.

“It was so interesting how quickly they were able to turn ‘Survivor’ into some real revenue numbers,” said Angela Auchey, an analyst at Federated Investors, Viacom’s fourth-largest outside investor. “There was huge surprise in TV.”

Revenue, adjusted for acquisitions, rose 13% to $5.77 billion from $5.12 billion, while cash flow jumped 18% to $1.2 billion from $1.0 billion. The figures treat the CBS purchase as if it occurred at the beginning of each quarter and reflects the adoption of a change in film accounting rules.

The results point to how Viacom is profiting from the predominance of its advertising-driven businesses, especially as the strength of the U.S. economy leaves companies with more money to spend on ads and marketing. Those businesses--broadcast and cable TV, radio and billboards--generated about 88% of Viacom’s overall cash flow this quarter.

“The combined companies are working in tandem,” said Barry Hyman, an analyst at Ehrenkrantz King Nussbaum Inc. “You are looking at the dominant company in media right now.” He has a “buy” rating on Viacom stock.