Time Warner Marches Ahead of Industry: What's Driving It?

Time Warner Inc. 's TWX foray into new markets, strategic investments in video content and technology, along with digital endeavors bode well for the stock. We observed that the shares of this diversified media conglomerate have not only outperformed the Zacks categorized Media Conglomerates industry, which occupies a space in the top 23% of the Zacks Classified industries (60 out of the 265) but also the broader sector in the past one year.

Over the said period, the stock has increased 33.8%, while the industry has advanced 14.6%. While the broader Consumer Discretionary sector of which they are part of gained 16.8% in the same time frame. Additionally, the stock's long-term earnings growth rate of 10.8% and a Value Score of "B" reflect its inherent strength.

Let's Take a Close Look

Time Warner's initiative to foray into new markets has been helping in broadening its client base and product portfolio. Management is now concentrating on enhancing its reach in the existing territories, through investments in local production and gaining distribution rights for new networks. Moreover, rising demand of its content from distributors and other cable or satellite providers is augmenting the company's revenues.

Time Warner, which accepted the buyout offer of AT&T Inc. T , is also boosting its broadband distribution capabilities. Further, the company has entered into an affiliate agreement for its full suite of networks, comprising TNT, Cartoon Network, CNN and TBS, to be available on Hulu's live-streaming service. Moreover, the company launched subscription video-on-demand service called FilmStruck, which features the largest streaming library of Contemporary & Classic Arthouse, Indie, Foreign & Cult Films.

Further, Time Warner's Turner Broadcasting and CBS Corporation CBS extended the rights to air The National Collegiate Athletic Association ("NCAA") Men's Division I Basketball Tournament, through 2032. The agreement, effective from 2011, will run through 2024. Given the massive popularity of the event, Time Warner's investors are likely to enjoy solid returns. With more viewership and higher advertising revenues, the company is well poised for top-line growth.

In addition, the company has been expanding its digital presence to facilitate consumers to enjoy content in more platforms and devices. All these factors have enabled Time Warner to post better-than-expected bottom-line in 19 straight quarters, as it reported third-quarter 2016 results. The company is going to report fourth-quarter results on Feb 8, 2017, and is likely to continue with its positive earnings surprise streak. This is because the stock has a favorable combination of a positive Earnings ESP of 2.52% and a Zacks Rank #3 (Hold).

However, decline in overall advertising spending and currency headwinds may adversely impact the company's performance. Technology advancements, rapid growth in new video services and shift in consumer viewing patterns, may also pose threats to the company.

Stock that Warrants a Look

A better-ranked stock includes Scripps Networks Interactive, Inc. SNI , which has surged 23.3% in the past one year. Moreover, it outperformed the Zacks Consensus Estimate by an average earnings surprise of 27.9% in the trailing four quarters. The stock carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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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 Nasdaq, Inc.

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

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