Paramount Global (PARA) (PARAA) shares popped more than 5% in after-hours trading yesterday after reporting a healthy Q2 earnings beat. Adjusted earnings per share (EPS) from continuing operations of $0.54 easily beat the consensus of $0.12 and also came in much stronger than Q2 FY23’s figure of $0.10. Investors also welcomed the company’s restructuring efforts under its strategic plan.
Meanwhile, Paramount’s revenue of $6.81 billion dropped 10.5% year-over-year and missed the Street’s estimates of $7.23 billion. the company’s television business, including its primetime topper CBS and other cable networks, witnessed a 17.2% year-over-year drop in revenue to $4.27 billion. This was mainly due to falling advertising revenues and license fees for its shows.
Meanwhile, the Direct-to-Consumer (DTC) (Paramount+ and PlutoTV) segment’s revenue rose 12.6% but Filmed Entertainment unit’s revenues fell 18.3% compared to the prior year period.
Paramount Undertakes Massive Restructuring
In a strategic move, ahead of its eagerly anticipated merger with Skydance Media, Paramount announced the write-down of its legacy cable network assets by nearly $5.98 billion. This goodwill impairment charge led to a $5.3 billion operating loss in the second quarter.
Additionally, the entertainment giant is cutting 15% of its U.S. workforce, given the declining cable TV business. The layoffs will affect roughly 2,000 roles and are a part of the company’s efforts to achieve at least $500 million in annual cost savings. Legacy cable TV operators are facing challenging times as viewership has declined massively with the rise of online streaming alternatives. This has impacted the ratings of several cable businesses and their advertising revenues. On August 7, Warner Bros. Discovery (WBD) announced a $9 billion write-off of its cable networks.
Hedge Funds Offload PARA Stock
TipRanks’ Hedge Funds Trading Activity tool shows that hedge funds are offloading Paramount Global stock. Currently, PARA has a Very Negative Hedge Fund Confidence Signal, as hedge funds decreased their PARA holdings by 53.7 million shares in the last quarter.
Is PARA a Buy or Sell?
On TipRanks, PARA stock has a Moderate Sell consensus rating as analysts remain cautious about Paramount’s turnaround story. The consensus rating is based on three Buys, seven Holds, and ten Sell ratings received during the past three months. Also, the average Paramount Global price target of $12.07 implies 18.2% upside potential from current levels. Shares have declined 30.3% year-to-date.
