Viacom shares soared 10% on Tuesday after the company reaffirmed financial guidance for its media networks wing on the heels of sealing a hard-fought carriage renewal agreement with AT&T’s DirecTV.
The stock gain underscored the importance of maintaining its presence on DirecTV and other AT&T channel bundles. Viacom on Tuesday reaffirmed its guidance of affiliate fee growth in the low single digits for the fiscal year 2019. Also putting some wind at Viacom’s sale is renewed speculation about movement on a CBS-Viacom reunion now that the AT&T carriage renewal is locked.
The reaffirmation of financial guidance was a signal to Wall Street that the DirecTV deal reached in the early hours of Monday did not amount to a rate-cutting bloodbath, as some feared because of AT&T’s own financial need to hammer down on programming costs for its MVPD platforms. Viacom acknowledged the new deal was a step down from the previous contract. But the thumbs up on growth guidance offered in February indicates that the DirecTV deal is in line with the terms of Viacom’s recent renewals with large MVPDs including Comcast, Charter Communications and Altice USA.
DirecTV, U-verse and the DirecTV Now and Watch TV streaming platforms make AT&T the nation’s largest traditional MVPD, which also has the benefit of national reach unlike the regionally focused cable operators.
Viacom shares were up as much as 10% in early trading before settling into an 8%-9% increase to around $28.45. Tuesday’s leap was welcome after the threat of a DirecTV blackout spurred a 5% drop in the stock price on March 20.
More to come