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Viacom (VIAB) Hits a 52-Week Low Due to Multiple Headwinds


Shares of Viacom Inc. VIAB hit a 52-week low of $25.37 per share during the trading session on Oct 9, before retracing a bit to close at $25.42. The stock has underperformed its industry in a year. It declined 28.9% in contrast to the industry’s 6.4% gain.

Reasons for the Downgrade

The company continues to face declining domestic advertising revenues. Also, the bleak outlook with respect to domestic affiliate revenues for the fiscal fourth quarter remains a concern. The company expects the metric to fall in low-single digits in the fiscal fourth quarter.

Viacom’s high debt level is also a concern. The company exited the fiscal third quarter with a high debt-to-capitalization ratio of more than 66%. In fact, its long-term debt-to-equity (expressed as a percentage) ratio is currently well over 100. This compares unfavorably with the industry’s tally of 57.4% and also the S&P 500 index’s reading of 84%.

The company is also liable to be hurt by adverse foreign currency movement as it operates globally. Plus, cable distributorsmay intend to cut costs due to stiff competition in the cable television industry which in turn might affect media stocks like Viacom.

Zacks Rank & Key Picks

Viacom currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Consumer Discretionary sector are American Woodmark Corporation AMWD, Anta Sports Products Ltd. ANPDF and Caleres, Inc. CAL, each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of American Woodmark, Anta Sports Products and Caleres have rallied 16.2%, 65.6% and 12.2%, respectively, in a year.

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