Time Warner Drops After Posting Loss of Turner Subscribers

  • Operating profit falls, stoking investors’ cord-cutting fears
  • Company raises 2016 earnings forecast to $5.30 to $5.40/share

Time Warner Inc. fell to a two-year low after its Turner cable-network division lost subscribers, adding to investors’ fears that big media companies aren’t adjusting quickly enough to a shift in viewership habits.

The shares dropped 5 percent to $60.07 at the close in New York Wednesday, putting the stock down 26 percent in the past year. A lower provision for taxes helped the media company beat analysts’ estimates for adjusted profit, but sales decreased 6 percent to $7.1 billion, trailing analysts’ $7.5 billion estimate, because of a shortfall at movie studio Warner Bros.

Adjusted operating income fell 15 percent from a year earlier to $781 million in the Turner division, which owns networks including TNT and CNN, thanks to higher costs for programming such as playoff baseball games. Adjusted operating income also declined 4.6 percent to $373 million at Warner Bros., which didn’t have a box-office hit to match last year’s “The Hobbit: The Battle of the Five Armies” and “Interstellar.”

The results increase the pressure on Chief Executive Officer Jeff Bewkes, who is trying to lift the company’s sagging stock price amid speculation that investors will push the company to sell itself or spin off HBO, its premium cable channel. Bewkes’s strategy has been to create original hit shows, find new ways to sell content online and acquire sports programming rights to get higher fees for its cable channels from pay-TV distributors. HBO is expanding its standalone Web service around the world, opening a new front against Netflix Inc. in the competition for cord-cutters. That service now has 800,000 subscribers, HBO Chief Executive Officer Richard Plepler said Wednesday.

Since August, media investors have grown concerned about declining video subscribers at pay-TV providers. Walt Disney Co., Viacom Inc. and 21st Century Fox Inc. have all reported earnings this week that disappointed investors, with Disney saying Tuesday that ESPN lost subscribers again last quarter.

  • Time Warner’s income-tax provision fell to $280 million from $381 million a year earlier.
  • Sales at Turner climbed 2 percent to $2.7 billion. Turner’s U.S. advertising revenue increased 5 percent because of growth in Turner’s news business and airing the Major League Baseball playoffs. The networks lost an unspecified number of subscribers in the U.S.
  • Revenue at HBO, with shows such as “Game of Thrones,” rose 6 percent to $1.4 billion in the quarter. HBO’s profit was flat at $393 million.
  • Fourth-quarter net income was $857 million, up from $718 million a year earlier.

The third-largest U.S. entertainment company forecast 2016 earnings per share of $5.30 to $5.40, beating analysts’ estimate of $5.26. The company also raised the quarterly dividend to 40 cents, beating analysts’ 37-cent estimate, and announced a $5 billion share buyback program, the first new authorization since June 2014.

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