Paramount (PARA) will report third quarter results after the market close on Thursday as advertising headwinds and streaming losses continue to hamper the legacy media company.
Paramount is expected to report a direct-to-consumer (DTC) loss of $438 million, wider than the second quarter’s $424 million loss and $343 million loss in the year-earlier period. The company has maintained that streaming losses will peak this year.
“We think leverage and a path to break-even at DTC are the key strategic concerns,” Wells Fargo analyst Steve Cahall warned in a note ahead of the report.
Here’s what Wall Street expects, according to Bloomberg consensus estimates:
Paramount+ currently boasts about 61 million total subscribers.
Linear ad revenue will also likely continue to be a sore spot, with analysts expecting the segment to once again decline by double digits. Wall Street estimates the company will post a 12% drop compared to the year-ago period after slumping 10% year over year in the second quarter.
Digital ad revenue, however, has remained resilient — strengthened by Paramount’s free ad-supported video-on-demand service, Pluto TV.
Paramount shares have struggled so far this year, down about 50% compared to the S&P 500’s (^GSPC) 10% gain during that same time period.
Paramount has committed to divesting non-core assets as it works to pare down debt and improve its balance sheet.
Last quarter, the company announced it sold Simon & Schuster to investment firm KKR after the publishing giant’s sale to Penguin Random House collapsed late last year. The $1.62 billion, all-cash deal was completed on Monday.
Its strong slate of assets suggests more M&A activity to come. Showtime and BET Media Group have been two assets recently entangled in sales rumors.
Paramount has long been viewed as a potential acquisition target due to its small size relative to competitors. The company boasts a current market cap of just under $7 billion, compared to Disney’s (DIS) $147 billion and Netflix’s (NFLX) $182 billion.
Paramount CEO Bob Bakish hinted more media M&A was on the horizon while speaking at a UBS media conference late last year.
“Consolidation has been the rule in business for a long time, certainly been the rule in media,” he said at the time. “So, it’s hard for me to bet on anything other than consolidation will happen in the future.”
Free cash flow should see a bounce back in Q3 due to low content spend amid the ongoing actors strike and since-concluded writers strike. Paramount recently delayed the theatrical release of “Mission Impossible — Dead Reckoning Part Two” to May 2025 from June 2024 amid the strike.
The metric, which has been negative every quarter so far this year, is expected to come in at a positive $163 million.
The company had previously guided to a return to positive free cash flow and earnings growth in 2024, aided by recent price hikes of its streaming tiers following the Paramount+ with Showtime integration, layoffs, business restructurings, and a dividend cut announced in May.
Amid the Showtime integration, coupled with the start of the NFL season, direct-to-consumer subscription revenue is expected to jump nearly 40%.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Credit: Source link
