(CMCSA) Viacom Gets ‘Transformers’ Boost

Viacom Inc’s (VIA.B) film division Paramount Picture is set to rock the Hollywood box office this summer with its latest release “Transformers: Dark of the Moon”. The movie has already grossed a whopping $416 million worldwide despite poor reviews from critics. However, the film is placed in the third position among the all time best opening weekend with collections of $372.1 million just behind Harry Potter and the Half-Blood Prince ($394 million) and Spider-Man 3 ($381.6 million).

The company’s successful movie franchise “Transformers” has already amassed a total $1.5 billion from its earlier two releases and is expected to touch the $2.5 billion mark going forward, thus bolstering its theatrical revenue business. It was also announced that DVDs and Blu-ray Discs of this massively popular flick will be released in the fourth quarter of 2011.

In the last quarter, Theatrical revenue of Viacom’s Filmed Entertainment division shot up 50% to $401 million. This was mainly attributable to a higher number of succesful movies released. We believe this trend will continue in the near future given that Paramount Picture has recently entered a feature-film animation venture.

Morever, with the release of Transformers 3, the company expects to earn nearly $1 billion from ticket sales as well as DVD sales that will in turn drive Filmed Entertainment segment revenue in the fourth quarter of 2011.

We also expect the upcoming third quarter to be strong for Viacom driven by higher revenues from the Filmed Entertainment division. In the ongoing quarter, hit movies released by Paramount have already accumulated nearly $1 billion.

Until June, Paramount had the largest market share (17.66%) in 2011 (excluding Transformers 3) followed by Universal pictures(14.96%), which is a subsidiary of  NBCUniversal  whose majority stake holder is Comcast Corporation (CMCSA) and Time Warner Inc.’s (TWX) Warner Bros. (14.8%).

Viacom, the leading media conglomerate in the U.S, reported blockbuster financial results for the second quarter of 2011, where both the top line and bottom line exceeded the Zacks Consensus Estimate by a significant margin.

We, thus, maintain our long-term Neutral recommendation for Viacom. Currently, Viacom has a Zacks#2 Rank, implying a short-term Buy rating on the stock.

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