ViacomCBS Earnings Were Solid. But It Won’t Be Enough to Win Over Skeptics.

ViacomCBS banal (ticker: VIAC) was astir level successful premarket trading connected Thursday, versus S&P 500 pointing to a 0.2% emergence astatine the open.

ViacomCBS reported $1.50 successful second-quarter net per share, up 205% twelvemonth implicit year, versus Wall Street analysts’ mean estimates of 98 cents a share. Adjusted net per stock were down 20% to 97 cents, which excludes a taxation benefit, a summation connected a sale, and different non-recurring income and costs. Without those items, the company’s net bushed wasn’t arsenic pronounced—analysts had been expecting 96 cents successful adjusted net per stock connected average. 

ViacomCBS’ second-quarter gross came successful astatine $6.6 billion, up 8% from a twelvemonth earlier and astir $75 cardinal much than consensus. Adjusted Oibda—short for operating income earlier depreciation and amortization, ViacomCBS management’s preferred nett measure—was down 25% twelvemonth implicit twelvemonth astatine $1.2 billion, but higher than the $1.1 cardinal consensus. Net income was $995 million, up of the $627 cardinal statement and much than treble the year-ago period.

A rebound successful advertizing revenues comparative to the pandemic-depressed 2nd 4th of 2020 positive continued maturation successful ViacomCBS’ streaming concern were down the year-over-year growth. The company’s non-streaming advertizing income were up 24%, to $2.1 billion, portion affiliate revenue—the fees that distributors similar cablegram companies wage monthly to see ViacomCBS’ channels similar CBS, Comedy Central, MTV, and Nickelodeon successful their bundles—were up 9%, besides to $2.1 billion.

Streaming was the standout performer successful the quarter: ViacomCBS said it added 6.5 cardinal streaming subscribers—versus 4.1 cardinal consensus—to extremity the 2nd 4th with much than 42 cardinal globally connected Paramount+ and Showtime. The services added astir 6 cardinal subscribers successful the archetypal quarter. The company’s streaming subscription gross was up 82%, to $481 million, successful the latest quarter, accounting for astir 15% of full revenue.

Pluto TV, ViacomCBS’ ad-supported escaped streaming service, saw much than 52 cardinal monthly progressive users past quarter, up by astir 2 cardinal implicit the erstwhile 4th and a small beneath analysts’ mean forecast. That follows maturation of 6 cardinal successful the archetypal quarter. Pluto-specific revenues were up 169%, and CEO Bob Bakish said connected Thursday’s net telephone that helium expects the work to person much than $1 cardinal successful gross this year. ViacomCBS’ full streaming advertizing revenue—which includes an ad-supported tier of Paramount+—was up 102% past 4th to $502 million. 

Total streaming-related revenues were $983 million, up 92% twelvemonth implicit year. That’s accelerated maturation and what investors privation to spot from a bequest media institution transitioning its concern exemplary to support up with changing user preferences.

Still, determination was plentifulness successful ViacomCBS’ study to temper enthusiasm.

For starters, the system is reopening and radical person much in-person amusement options than they person had for the past year. That’s a headwind to overall streaming manufacture growth: Less clip sitting connected couches with thing to bash means little request for Paramount+, Netflix (NFLX), oregon Walt Disney’s (DIS) Disney+.

Secondly, ViacomCBS is pouring wealth into caller shows and movies for its streaming services to support those subscribers coming. The 25% year-over-year diminution successful Oibda past 4th contempt an 8% emergence successful revenues reflected that higher contented investment. ViacomCBS won’t get overmuch recognition from investors for its gains successful bequest advertizing and affiliate revenues if it’s plowing that currency backmost into money-losing streaming. The company’s escaped currency travel was antagonistic $25 cardinal past quarter. And the year-over-year comparisons for those bequest cablegram and broadcast TV businesses volition get tougher successful the coming quarters, truthful momentum determination mightiness not past long.

The streaming wars aren’t a winner-takes-all game. Consumers person shown that they’ll subscribe to aggregate services astatine once. But Paramount+ and Pluto are tiny food successful a pond with deep-pocketed behemoths similar Netflix, Disney, and soon a combined WarnerMedia and Discovery (DISCA). ViacomCBS is disconnected to a beardown start, but semipermanent occurrence successful streaming as an autarkic company is inactive acold from assured.

Going forward, Paramount+ is acceptable to motorboat successful much planetary markets, including Australia and New Zealand this period and respective European countries including the U.K., Italy, and Germany adjacent year. And the NFL shot season is astir the corner. That means much viewers and advertizing income for CBS and perchance much subscribers for Paramount+, which volition amusement immoderate games each week.

ViacomCBS banal has returned astir 5% including dividends successful 2021, versus an 18% instrumentality for the S&P 500. Disney banal is down astir 5% and Discovery has mislaid 6%.

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