-By Anthony Crupi

Although it isn’t due to provide its quarterly earnings results for another 25 days, Viacom on Friday issued a revised business outlook, warning investors that domestic ad revenues will be down 3 percent versus the third quarter of 2007.

Based on preliminary information, Viacom said it now expects to report adjusted diluted earnings per share of approximately $0.53 to $0.55 for the third quarter of 2008, down between 18 percent and 15 percent versus the $0.65 diluted EPS the media conglomerate posted in the year-ago period.

Analysts surveyed by FactSet Research had projected third-quarter earnings of 62 cents per share.

“Given the rapid softening of the economy and the uncertainty this creates in forecasting advertising growth, we are taking the prudent step of moderating our near-term targets,” said Viacom president and CEO Philippe Dauman. “At the same time, we are moving quickly to adapt to the changing environment and will take appropriate steps to secure new efficiencies that will enhance our longterm earnings growth prospects.”
 
Dauman issued a similar downward revision in May, when he informed investors that ad revenue would grow by 3 percent to 4 percent in the second quarter, down from an initial projection of 7 percent growth. On July 29, the actual results reflected an even tougher environment, as Viacom reported that ad revenue grew just 1 percent in the quarter.

At the time, Dauman cautioned that the softness in the second-quarter scatter market would likely continue on into Q3.

For all that, Viacom did offer a glimmer of positive news on the media networks front, as Dauman reported that affiliate fees saw “double-digit” growth in the third quarter.

On Oct. 2, Pali Capital analyst Richard Greenfield reiterated a “buy” rating on Viacom shares, although he lowered the target price from $51 to $40. In a note to investors Greenfield called out Dauman and the Viacom management team for their relative invisibility. “[They’ve] done a poor job explaining why they are underperforming peers in advertising sales growth,” Greenfield said.

Greenfield’s call for more transparency was tempered by his observation that the cable network business is not in decline. “We believe cable networks with solid original programming are increasingly well-positioned to drive subscription fees from multi-channel distributors around the world,” Greenfield said, adding that cable should continue to get a lift from its original programming.

In the midst of an historic market crash, during which the Dow Jones Industrial Average has shed 20 percent of its value and fell below the 8,000 mark for the first time since April 2003, Viacom’s stock continues to plummet. In early afternoon trading Friday (Oct. 10), shares hit a 52-week low, dropping 15 percent to $17.32.

Viacom will report its third quarter earnings on Monday, Nov. 3.