Q4 Preview: Analysts Cautious on Time Warner (TWX), Cite Lighter Ad Spend, Turner Ratings


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Shares of Time Warner Inc. ( TWX ) closed Tuesday's session up 0.3 percent heading into the company's fourth-quarter earnings report, scheduled for release before the market opens Wednesday.

The Street is currently expecting earnings of 87 cents per share on revenue of $8.07 billion. The estimates compare with EPS of 68 cents and revs of $7.80 billion reported in the same period last year.

Shares gained 21.5 percent to $36.14 in the quarter, and are up about 5.8 percent since. Time Warner has traded within a range of $27.62 to $38.62 over the last year.

Data from Bloomberg has 25 analysts at buy, nice at Hold, a none with a Sell rating. The Street's price target average is $41.50, with a low of $38 and high of $46.

Analyst Comments

  • Goldman Sachs is looking for EPS of 88 cents The firm sees Cable Network ad growth of 2 percent for the quarter, commenting, "In addition to weak scatter demand in 4Q, Turner's ratings in 4Q were down 12% yoy on an advertising revenue weighted basis."

    Filmed Entertainment operating income should be $429 million, with Harry Potter DVD sales leading the way, as well as a cherry deal with Netflix (Nasdaq: NFLX).

    Investor focus is likely to fall on 2012 earnings outlook.

  • Wedbush is expecting EPS of 88 cents. Networks should see 6 percent of revs growth and 17 percent of EBIT growth. Filmed Entertainment EBIT remains at $463 million.

    Wedbush said, "Our checks and commentary from Viacom [recently] indicate advertisers are selectively trimming some ad buys, although we believe upfront option cancellation activity continues to be at normal levels. In subscription growth trends, we expect Turner to be solid, given our most recent proprietary media usage survey shows yr/yr stability in cord-cutting trends, but some potential pressure for HBO, as our surveys indicate yr/yr increases in reported premium pay TV cancellations."

  • Deutsche Bank sees EPS of 86 cents on revenue of $8.305 billion. Cable Network revenue should grow 5 percent with EBIT increasing 21 percent due to lower costs at Turner. The firm said, "Despite lower conviction due to Viacom's 400bp ad miss, we are maintaining our 2.5% Turner US ad growth with 4Q11 Turner target demo viewers -9.4% Y/Y (partly lack of NBA) vs. 13% or so upfront CPM increases (3Q11 was adv +5% vs. -5% viewers but lower prior yr upfront CPM increases)."

    Film EBIT growth could be 1 percent (or 2 percent adjusted).

  • Wells Fargo sees EPS of 87 cents in the quarter. Some assumptions Wells Fargo has into the numbers are:
    • Management commentary at a January 2012 conference, specifically, that the company's prior forecast of "mid-single-digit advertising growth was aspirational";

    • Weaker ratings at TNT (down 19% among Total Households, Total Day), due to "stale" syndicated programming and a shortened NBA season associated with the lockout (we believe the loss of NBA games had a 200-basis-point adverse impact on advertising in the quarter);

    • TBS (down 7.1% among Total Households, Total Day) also saw an overall decline in FQ4 2011 on syndicated programming, but ratings picked up momentum toward the end of the quarter due to the newly purchased Big Bang Theory

    • A slight drop for CNN, down 1% among Total Households, Total Day, but primetime was up 1.5%.

    • A 9.1% negative impact for Cartoon Network, due to the overall decline in children's' viewership.

    • No real change in subscription trends from FQ3 2011 (i.e., mid-single-digit growth);

    • No real trend in change within Time Warner's publishing division (it remains to be seen what new CEO Lisa Lang will have in store on the digital front).

    • Tough theatrical comparisons, due to the release of Harry Potter and the Deathly Hallows Part 1 in FQ4 2010, which generated $955 million at the global box office.
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Time Warner's past performance at Streetinsider's Time Warner's Income Statement .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: NFLX , TWX

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