Time Warner Beats, Ups Dividend - Analyst Blog

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Time Warner Inc. ( TWX ), the diversified media conglomerate, recently posted better-than-expected fourth-quarter 2011 results. The quarterly earnings of 94 cents a share beat the Zacks Consensus Estimate of 87 cents, and surged 40% from 67 cents in the prior-year quarter, reflecting higher adjusted operating income across Networks and Publishing segments. Share repurchase activity also provided some cushion to the bottom-line.

On a reported basis, including one-time items, earnings came in at 76 cents a share up from 68 cents delivered in the year-ago quarter.

For fiscal 2011, Time Warner posted earnings of $2.89 that surpassed the Zacks Consensus Estimate of $2.81, and jumped 20% from the prior-year. Time Warner now expects fiscal 2012 earnings per share growth in the low double-digit rate. Shares of the company were up 2.4% or 90 cents to $39.00 in pre-market trading.

The current Zacks Consensus Estimate for fiscal 2012 is $3.14 per share, reflecting a growth of 9% from fiscal 2011. Following the earnings release we could witness a revision in the Zacks Consensus Estimate with analysts tweaking their estimates to better align with the company's growth projection.

Time Warner's total revenue in the quarter grew 5% to $8,193 million from the prior-year quarter, on the back of growth registered in the Networks and Filmed Entertainment segments, and handily beat the Zacks Consensus Estimate of $8,096 million. Adjusted operating income during the quarter climbed 20% to reach $1,705 million, whereas operating margin expanded 260 basis points to 20.8%.

For the full year, total revenue climbed 8% to $28,974 million, and came ahead of the Zacks Consensus Estimate $28,829 million.

The company has been expanding its digital presence to facilitate consumers to enjoy contents 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 5% to $3,499 million, driven by an increase of 5% in subscription revenue, a jump of 2% in advertising revenue and a surge of 16% in content revenue. Adjusted operating income for the segment soared 27% to $1,144 million attributable to growth in revenue and the timing of programming and marketing costs.

Time Warner's Filmed Entertainment segment revenue climbed 7% to $3,890 million attributable to robust home entertainment and videogame schedules and new subscription video-on-demand accords, partially offset fall in theatrical film revenue and television license fees.

Adjusted operating income for the division, which comprises Warner Brothers, came in at $433 million, reflecting an increase of 4%, on the heels of increased revenue, partially offset by a rise in overhead expenses and higher advertising costs.

Publishing revenue nudged down 1% to $1,044 million reflecting a 2% decline in subscription revenue and a 4% fall in other revenue, partly offset by a 17% jump in content revenues. However, the adjusted operating income surged 23% to $224 million from the prior-year quarter, principally due to a fall in restructuring and severance costs.

Other Financial Discussions

Time Warner ended the quarter with cash and cash equivalents of $3,476 million, long-term debt of $19,501 million, reflecting a debt-to-capitalization ratio of approximately 39.4%, and shareholders' equity of $29,954 million.

During the quarter, Time Warner incurred capital expenditures of $261 million and generated free cash flow of $1,045 million.

From January 1, 2011 through February 3, 2012, Time Warner has bought back 144 million shares, aggregating $4.9 billion. The company's Board of Directors authorized a new share buyback plan of $4 billion. The company also raised its quarterly dividend to 26 cents a share, reflecting an increase of 11% from 23.5 cents. The increased dividend will be paid on March 15, 2012 to shareholders of record as on February 29, 2012.

Dividend increases and share repurchases have now become common trends among companies boasting a stable cash position and healthy cash flows. These strategies not only enhance shareholders' return but also raise the market value of the stock.

Currently, we have a long-term Neutral rating 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 recommendation, 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DIS , NWSA , TWX

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