Viacom (NYSE:VIA) (NASDAQ:VIAB) reported third quarter fiscal year 2014 revenue decline of 7% to $3.4 billion and a 6% increased in diluted EPS to $1.40. The filmed entertainment division was worst performer with a 26% decline in revenue to $856 million. The number of movies and the timing of releases hurt revenue for the quarter, but should benefit the company in FY 4Q2014 with the release of Transformers: Age of Extinction and Teenage Mutant Ninja Turtles. The media networks division also had weak revenue growth of just 1%, due to flat world-wide affiliate revenue fees. Free cash flow fell 23% to $560 in the fiscal year third quarter and down 31% to $1.36 billion through the first nine months in the fiscal year.
During the quarter, Viacom return nearly $1 billion to investors through stock buybacks and dividends. In the third quarter, the company purchased 10 million shares for $850 million. Since FY 2011, Viacom has repurchased 217.4 million shares for $12.85 billion and still has $7.15 billion left under its share repurchase program. The filmed entertainment division will rebound in FY 4Q2014 from strong movie releases and a weak prior year quarter comparison. FY 4Q2014 domestic box office revenues have already more than doubled FY 4Q2013 results.
I've written two articles on Viacom, "Viacom Quietly Becoming A Cash Cow" and "Viacom Holds The Most Value Compared To Media Content Peers". The weak 3Q2014 results don't change my view that Viacom is undervalued and a strong company. Revenues will rebound significantly in FY 4Q2014 with 2 blockbuster movies being released in the quarter. Transformers, released on 6/27/14, brought in over $1 billion in world-wide sales, making it the highest grossing film this year. The $7.15 billion still left in the stock buyback program can reduce total outstanding shares by more than 20%, which will help improve EPS. Viacom is set-up to finish the fiscal year on a high note.
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