Time Warner Beats Estimates - Analyst Blog


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Time Warner Inc. ( TWX ), the diversified media conglomerate, recently posted better-than-expected first-quarter 2012 results.

The quarterly earnings of 67 cents a share beat the Zacks Consensus Estimate of 64 cents, and surged 16% from 58 cents posted in the prior-year quarter, reflecting higher adjusted operating income across Networks, and Film and TV Entertainment (earlier Filmed Entertainment) segments. Share repurchase activity also provided some cushion to the bottom line.

On a reported basis, including one-time items, quarterly earnings came in at 59 cents a share -- flat with the year-ago quarter.

Time Warner reiterated its low double-digit growth expectation for fiscal 2012 earnings per share. The current Zacks Consensus Estimate for fiscal 2012 is $3.20 per share, reflecting growth of 11% from fiscal 2011.

Time Warner's total revenue in the quarter grew 4% to $6,979 million from the prior-year quarter on the back of growth registered in the Networks, and Film and TV Entertainment segments. The reported revenue also handily beat the Zacks Consensus Estimate of $6,809 million.

Adjusted operating income during the quarter climbed 6% to reach $1,351 million, whereas operating margin expanded 30 basis points to 19.4%.

The company has been expanding its digital presence to facilitate consumers with content on more platforms and devices. The company also remains committed to augment its investments in programming, production and marketing, while concentrating on operating and capital efficiencies.

Segment Details

Networks division's revenue, which includes Turner Broadcasting and HBO, rose 3% to $3,602 million, driven by an increase of 5% in subscription revenue and a jump of 6% in advertising revenue, partially offset by a decline of 18% registered in content revenue.

Adjusted operating income for the segment rose 3% to $1,201 million attributable to growth in revenue, partially offset by higher expenses, including increased programming costs.

Time Warner's Film and TV Entertainment segment revenue climbed 7% to $2,784 million attributable to robust theatrical line-up, increased television licensing revenue and the subscription to video-on-demand accessibility of a television series, partially offset by a fall in home entertainment revenue.

Adjusted operating income for the division, which comprises Warner Brothers, surged 39% to $215 million on the back of increased revenue, partially offset by higher film costs.

Publishing revenue fell 3% to $773 million reflecting a 5% decline in advertising revenue due to a fall in domestic magazine advertising revenue, and a 2% drop in subscription revenue on account of reduced domestic and international newsstand revenues, partly offset by increased domestic subscription sales.

Adjusted operating income plunged 38% to $39 million from the prior-year quarter, principally due to lower domestic magazine advertising revenue.

Other Financial Aspects

Time Warner ended the quarter with cash and cash equivalents of $2,877 million, long-term debt of $18,425 million, reflecting a debt-to-capitalization ratio of approximately 38%, and shareholders' equity of $29,781 million.

During the quarter, Time Warner incurred capital expenditures of $133 million and generated free cash flow of $318 million.

From January 1, 2012 through April 27, 2012, Time Warner bought back 24 million shares, aggregating $889 million. The company's board of directors had authorized a share buyback plan of $4 billion in January 2012.


Currently, we have a long-term Neutral recommendation on the stock. Moreover, Time Warner, which competes with News Corporation ( NWSA ) and Walt Disney Company ( DIS ), holds a Zacks #3 Rank that translates into a short-term Hold rating, and correlates with our long-term view.

DISNEY WALT (DIS): Free Stock Analysis Report
NEWS CORP INC-A (NWSA): Free Stock Analysis Report
TIME WARNER INC (TWX): Free Stock Analysis Report
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