LOS ANGELES -- Entertainment media stocks dropped Friday as Viacom and CBS Corp. slashed profit forecasts, and Sumner Redstone's theater chain announced it would sell Viacom and CBS shares to pay down debt.
Shares of Viacom VIA owner of Paramount Pictures and MTV Networks, nose-dived 17.3%, or $3.58, to close at $17.10, while CBS CBS plummeted 20.1%, or $2.04, to $8.10.
Both Viacom and CBS blamed slumping advertising and a weakening economy in cutting their forecasts for the year.
"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," Viacom Chief Executive Philippe Dauman said in a statement.
Viacom said its full-year net earnings from continuing operations would grow in the "mid-single to low double-digit" percentage range, down from the "low double-digit" growth it predicted in July, based on a 2% decline in global ad revenues.
The outlook is based on earnings of $2.36 a share in 2007.
The company said it expects to see adjusted diluted earnings in the third quarter between 53 cents and 55 cents a share.
CBS, however, said it expects 2008 adjusted operating income before depreciation and amortization to decline in the mid-teen percentages versus 2007, down from a July forecast of growth in the low single-digits.
The company's OIBDA in 2007 was $3.2 billion.
Excluding one-time items, CBS expects to report third-quarter adjusted earnings per share of 42 cents to 44 cents, compared with 51 cents in the period a year ago. It expects 3% revenue growth.
It also said it would take a non-cash impairment charge of $14 billion in the third quarter to reflect a decreased book value for its radio and TV stations.
CBS reports third-quarter earnings Oct. 30, while Viacom reports Nov. 3.
To add to the selling pressure, movie theater operator National Amusements said Friday that a subsidiary plans to sell $400 million of its nonvoting shares in Viacom and CBS to pay down debt. All three companies are controlled by Redstone.
The subsidiary expects to sell approximately an equal dollar value of Viacom and CBS nonvoting shares.
Near the end of the day, Standard and Poor's analyst Tuna Amobi raised his rating on both CBS and Viacom to "hold" from "sell" based on their low stock prices, with Viacom down 60% and CBS down 69% since the beginning of the year.
Earlier, UBS analyst Michael Morris cut the target price for Viacom to $27 from $35 and lowered his estimate for earnings per share in fiscal 2008 by 11 cents to $2.51.
Morris said despite Paramount distributing summer hits like Iron Man and Indiana Jones and the Kingdom of the Crystal Skull, he expected to see "weakness for smaller titles and TV DVD sales in the fourth quarter and into 2009."
He also expected domestic cable ad sales growth at Viacom to underperform growth at its peers.
Morris also slashed ad revenue, DVD sale and profit outlooks for other major companies.
Time Warner shares fell 8.9%, or 90 cents, to close at $9.19. News Corp. shares closed down 8.1%, or 75 cents, at $8.46; The Walt Disney Co. shares fell 3.2%, or 76 cents, to $23.04.