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Time Warner Profit Rises on Films, Cable-TV Sales

Time Warner Inc., owner of the Warner Bros. film studio and TBS cable-television channel, reported first-quarter profit that beat analysts’ estimates as movie sales rose and advertising rebounded.

Excluding some items, earnings rose to 61 cents a share, the New York-based company said today in a statement. Analysts projected 48 cents, the average of 17 estimates compiled by Bloomberg.

Box-office and DVD sales of the “The Blind Side” and “Sherlock Holmes” helped lift revenue. Cable and magazine advertising sales rose 9 percent and 5 percent respectively after slumping in 2009, topping some analysts’ projections and underscoring an industrywide advertising recovery.

“That’s very encouraging because we’ve been suffering through a long period in trying to find the bright side,” Jim Goss, an analyst at Barrington Research Associates, said of cable advertising in a Bloomberg Television interview. “Films and networks and publishing all were on the high end of my expectations.”

Goss, based in Chicago, rates the stock “outperform.”

The company said 2010 adjusted earnings from continuing operations will increase by a percentage “at least in the mid- teens” from $1.83 a share last year. That compares with a February forecast of a “mid-teens” percentage increase. Analysts project earnings of $2.15, the average of 19 estimates compiled by Bloomberg, implying growth of 17 percent.

Time Warner Shares

Time Warner, also the owner of CNN and HBO, fell 45 cents, or 1.4 percent, to $32.22 at 10:12 a.m. on the New York Stock Exchange. U.S. stocks sank on concern Europe’s debt crisis is worsening as protests in Greece turned deadly, with the Standard & Poor’s 500 Index tumbling as much as 1.3 percent.

Net income increased 9.8 percent to $725 million, or 62 cents a share, from $660 million, or 55 cents, a year earlier, Time Warner said. Revenue rose 5.4 percent to $6.32 billion from $6 billion. Analysts projected sales of $6.26 billion, on average.

Time Warner Chief Executive Officer Jeff Bewkes has cut publishing jobs and reduced the film studio’s production slate to boost earnings.

Viacom Inc., the owner of Comedy Central and MTV, said last week that cable ad sales advanced 3 percent worldwide. Discovery Communications Inc., the owner of Animal Planet, reported a 9 percent gain in U.S. cable ad revenue.

Pricing increased for commercials sold closer to air date on Time Warner’s cable channels, offsetting a decline in ads at CNN in the U.S. Advertising growth topped the 2.5 percent gain estimated by Imran Khan, an analyst with JPMorgan Chase & Co.

TBS hired Conan O’Brien, the ousted host of NBC’s “Tonight Show,” for an 11 p.m. talk show to begin in November.

‘Sherlock Holmes’

Warner Bros.’s first-quarter releases included “Valentine’s Day” and “The Book of Eli.” Its revenue also benefited from continued ticket sales and home-video releases of “Sherlock Holmes,” out in theaters Dec. 25, and “The Blind Side,” out in November. The film division’s operating income rose 43 percent to $307 million.

The studio is in second place this year with $684.4 million in box-office revenue as of May 2, behind News Corp.’s Twentieth Century Fox, according to researcher Box Office Mojo.

Ad sales at the Time Inc. magazines exceeded Khan’s estimate for a 2 percent increase, a growth rate he had said may be too optimistic. The unit posted operating income of $50 million, compared with a loss of $32 million a year earlier.

AOL, the Internet unit spun off from Time Warner in December, is excluded from the year-earlier results.

To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net

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