By Emily Bary
CBS and Viacom ended their time as separate companies on a disappointing note and management on Thursday gave a downbeat view of the year ahead for the combined entity.
Shares of ViacomCBS Inc. /zigman2/quotes/200340870/composite VIAC +4.03% plunged more than 17% in Thursday trading after the company posted financials that were weaker than analysts were expecting and gave new details about streaming plans.
The stock is on track for what would effectively be its largest single-day percentage drop since March 30, 2009, according to Dow Jones Market Data. ViacomCBS shares are a continuation of the old CBS shares.
ViacomCBS earned an adjusted 97 cents a share on revenue of $6.87 billion for the fourth quarter, while analysts were projecting $1.41 and $7.34 billion, respectively. The company’s 2020 outlook for $5.15 to $5.50 in adjusted earnings per share also came in shy of expectations, though management now expects to generate more cost synergies than previously planned as a result of the merger.
Bank of America Merrill Lynch analyst Jessica Reif Ehrlich called the results “admittedly noisy, slightly weaker than expected and generally not reflective of the unified corporate strategy,” since the ViacomCBS deal only closed in December.
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Chief Executive Bob Bakish also said that the quarterly release “overwhelmingly reflects two separate companies executing on separate strategies.”
The two sides merged with the expectation that scale could help ViacomCBS weather big changes to the media industry. ViacomCBS is one of the last big media companies to deliver results for the quarter and its report comes after many others in the industry painted a gloomy picture of the traditional-media landscape.
MoffettNathanson analyst Craig Moffett estimates that traditional television distributors shed about 1.5 million subscribers in the fourth quarter and that more than 6 million U.S. households cut the cord throughout 2019 as more companies entered the fray with new streaming offerings.
ViacomCBS and its peers must find ways to control the financial impact of declining linear-TV viewership while making their video streaming efforts stand out in a crowded field. Striking the right balance can be difficult, as Walt Disney Co. /zigman2/quotes/203410047/composite DIS +2.89% showed earlier this reporting season when it posted strong initial subscriber numbers for its new Disney+ service but was weighed down by challenges in traditional TV advertising.
See more: Disney can’t escape legacy media pressure even as streaming service takes off
Bakish discussed the company’s own streaming ambitions as it continues to push free, paid, and premium over-the-top options. “Our content strategy isn’t about spending more,” he said, but rather “aligning combined company spending with growth potential” and getting better value from content over a now-larger asset base. He plans to bring “significant content” from Viacom’s brands over to the existing CBS All Access streaming service.
He also expects ViacomCBS to benefit from a different approach than some of its peers when it comes to licensed content, indicating that there could be “greater demand for premium content” as others move away from licensing in order to bolster their own streaming libraries.
“We will benefit from our deal to license South Park, and we will see more opportunities to leverage our vast library,” Bakish said.
The stock is off 29% so far this year, as the S&P 500 /zigman2/quotes/210599714/realtime SPX +1.36% has added 4%.