Time Warner Inc.
) posted first-quarter 2014 earnings of 91 cents a share that
surpassed the Zacks Consensus Estimate of 88 cents and increased
20% from the prior-year quarter earnings of 76 cents, reflecting
strength across Turner, Home Box Office (HBO) and Warner
However, including one-time items, quarterly earnings came in
at $1.42 per share, substantially up from 79 cents earned in the
This Zacks Rank #3 (Hold) stock now anticipates low teens
growth in earnings per share for 2014, after taking into account
the divestiture of Time Inc., which is expected to conclude in
the second quarter of 2014.
Time Warner's total revenue of $7,545 million jumped 9%
year-over-year, and surpassed the Zacks Consensus Estimate of
$6,755 million. The company's investments in content and
technology in the recent years have boded well.
Adjusted operating income increased 7% to reach $1,536
million, whereas adjusted operating margin contracted 100 basis
points to 20%.
In a strategic move to unlock the value of its core business
activities, Time Warner decided to go ahead with its plan to spin
off Time Inc. magazine into a separate, publicly traded company.
The move to shed Time Inc. followed the negotiation between Time
) to create a magazine based company, which eventually did not
Excluding Time Inc., revenue grew 10%, while adjusted
operating income climbed 12%. On the other hand, earnings came in
at 97 cents compared with 77 cents a share in the prior-year
The decision would facilitate Time Warner to concentrate
purely on television networks and film and TV production
businesses. The decision would be accretive to the shareholders
of Time Warner in the same fashion, when this diversified media
Time Warner Cable Inc.
) into independent companies.
's revenue rose 5% to $2,593 million, driven by growth of 7% in
subscription revenue and 5% in advertising revenue. Adjusted
operating income for the segment grew 3% to $895 million
attributable to rise in revenue, partially offset by higher
Higher subscription revenue was primarily attributed to rise
in domestic rates and international growth. Advertising revenue
gained due to growth witnessed at Turner's domestic and
international entertainment networks on account of rise in
revenue grew 9% to $1,339 million driven by growth of 8% in
subscription revenue and 13% in Content revenue. Higher
subscription revenue was primarily attributed rise in domestic
rates and the merger of HBO Asia and HBO Nordic. On the other
hand, Content revenue increased on account of rise in home video
revenue benefiting from sales of
Game of Thrones: The Complete Third Season
Adjusted operating income for the division jumped 11% to $464
million principally attributable to rise in revenue, partially
offset by increase in programming and distribution costs.
revenue jumped 14% to $3,066 million resulting from sturdy
theatrical slates, higher videogames revenue, rise in initial
telecast revenue and jump in international television licensing
Adjusted operating income for the division surged 43% to $380
million on account of increased revenue, partly offset by
increased associated film costs.
revenue inched up 1% to $745 million gaining from the acquisition
of Time Inc. Affluent Media Group in the fourth quarter of 2013
and certain weekly titles having one extra issue. Subscription
revenue increased 5%, partly offset by 11% decline in Other
revenue. Advertising revenue remained flat. Excluding the
acquisition of Affluent Media Group, revenue would have declined
The segment registered adjusted operating loss of $94 million
compared with operating loss of $9 million in the year-ago
Other Financial Aspects
Time Warner ended the quarter with cash and cash equivalents
of $3,546 million, long-term debt of $20,226 million and
shareholders' equity of $30,044 million.
During the quarter, Time Warner incurred capital expenditures
of $99 million and generated free cash flow of $1,681 million.
From Jan 1, 2014 through Apr 25, the company bought back about 20
million shares, aggregating approximately $1.3 billion. The
company's board in Jan 2014 authorized a share repurchase program
of $5 billion.
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