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Paramount stock falls as it slashes quarterly dividend

Yahoo Finance’s Allie Canal joins the Live show to discuss the decline in stock for Paramount following first-quarter earnings.

Video Transcript

BRAD SMITH: Also everyone, shares of Paramount, we're tracking those this morning. They're plummeting after missing estimates on both the top and bottom line in the latest quarter. The company also slashed its quarterly dividend to $0.05 per share from $0.24. Let's bring in Allie Canal now with the details on this one. Allie, what do we know?

ALEXANDRA CANAL: Yeah, another disappointing quarter for Paramount. If we take a look at the numbers here, revenue coming in at 7.27 billion, that was off the expected 7.43 billion. Adjusted earnings of just $0.09 versus the $0.14 expected.

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Now, one bright spot here for the quarter was the surge in net additions for Paramount+ subscribers. Those came in at 4.1 million versus the 3 million expected. We also saw global Pluto monthly active users hit 80 million. But again, this company is just dealing with cash burn, free cash flow still in the negatives.

They did say that in 2024, they are going to expect free cash flow to be positive, a return to earnings growth off of a slew of various initiatives. The call is continuing on right now. It's just about to wrap up. But on the call, they kept driving in this point of returning value to shareholders over the long term. That's one of the reasons why they decided to cut that dividend payment by so much. It was $0.24, now it's $0.05. They're hoping that can improve their balance sheet.

They did say on the call they want to continue to divest non-core assets. They're going to re explore that sale of Simon & Schuster. And they really do want to make sure that they are returning to that earnings growth, returning to that positive cash flow. But in the short term, there's going to be a lot. of pain.

Advertising also a dismal part of this quarter. Ads within the TV media unit, that fell 11% year over year in Q1 after falling 7% in the fourth quarter. Now management has guided that the back half of this year should see some improvement. Although analysts on Wall Street, they are a bit skeptical of that timeline.

So a lot of problems at this company right now. But they are trying to really perk up investor confidence heading into the back half of the year and into 2024. But with shares off nearly 20%, it seems like they're not doing such a great job right now.

BRAD SMITH: Absolutely.

RACHELLE AKUFFO: And Allie, to that point, how much of this then is an industry-wide problem-- we know we've talked about some of this ad spend getting more consolidated-- versus a Paramount-specific problem?

ALEXANDRA CANAL: It certainly is an industry problem. It's a macro problem. We're seeing advertising hammer these companies across the board. We'll hear from Warner Bros. Discovery tomorrow. That's another legacy media giant that has dealt with a lot of advertising headwinds. So it's certainly cyclical.

Even when we talk about these accelerated streaming losses, all of these companies, that is what they've been dealing with, this intense cash burn. On top of that, you have risks of the writers strike going on right now.

Bob Bakish, he just talked about that on the earnings call, saying that right now, they have a lot of content in the can. But in terms of the impact it could have on revenue and their balance sheet, that's all going to depend on how long this strike continues. And right now, there's such a stark gap between what the writers want, what the studios want that it's a possibility that it could continue for quite some time.

So it's not totally a Paramount-specific problem. The problem though, is that Paramount has a lot of these other assets. They are in that legacy TV business at a time when we're seeing a lot of cord-cutting. So they're really trying to restrategize. They're trying to focus in on streaming.

There has been rumors and reports of sales of different parts of their business, like their BET media group. But all of that remains to be seen.

BRAD SMITH: All right, we're going to be watching them coming into the start of today's trading activity. Yahoo Finance's own Allie Canal breaking down all things Paramount. That call about to wrap up.