November 16, 2018 / 8:52 AM / 8 months ago

UPDATE 1-Vivendi shares surge as music business drives growth

* Q3 sales 3.38 bln euros vs forecast of 3.32 bln

* Shares surge higher (Adds further analyst comment and detail)

By Sudip Kar-Gupta

PARIS, Nov 16 (Reuters) - Vivendi shares rose on Friday after the French media conglomerate reported better-than-expected third quarter sales, helped by growth at its Universal Music Group (UMG) arm.

Vivendi shares were up 4.6 percent in early session trading, among the top performers in Europe.

Late on Thursday, Vivendi reported sales rose 5.5 percent in the third quarter from a year ago to 3.38 billion euros ($3.84 billion), beating a forecast in an Inquiry Financial poll for Reuters of 3.3 billion euros.

Vivendi added it had no plans to sell its stake in Telecom Italia, where it has been battling activist fund Elliott for influence, and that it was lining up banks for a possible sale of part of UMG.

Hits by rapper Drake contributed to growth at UMG during the period, while Paul McCartney’s latest album and the Mamma Mia! soundtrack had also boosted performance.

Canal Plus was close to meeting 2018 targets set for the TV and entertainment part of the Vivendi business, Vivendi said, adding it was confident over Canal Plus’ prospects for 2019.

“We reiterate our take on Vivendi that the group’s strategy is shifting this year from aggressive mergers and acquisition tactics to portfolio rationalization and sweet shareholder returns,” wrote brokerage Raymond James, keeping an “outperform” rating on Vivendi shares.

Pierre Willot, a fund manager at Paris-based firm Montaigne Capital, said Vivendi’s third-quarter sales figures were good but added he was steering clear of buying the stock for now, given tough competition faced by Canal Plus.

“The sales figures seemed very positive, with a new acceleration at Universal Music Group, but we have some doubts over Canal Plus, which is facing heavy competition from Netflix,” said Willot.

Analysts at Credit Suisse echoed some of Willot’s views over Canal Plus, but added that those relatively minor concerns were offset by the growth at UMG .

Vivendi shares are down around 2 percent so far in 2018, slightly underperforming a 1 percent gain in the STOXX Europe 600 Media index.

The holding company of billionaire Vincent Bollore has roughly 29 percent of the voting rights in Vivendi and 26 percent of Vivendi’s share capital.

$1 = 0.8808 euros Reporting by Sudip Kar-Gupta; Editing by Dominique Vidalon/Keith Weir

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