Time Warner Tops Estimates as Cable, HBO Fees Offset Ad Drop

Updated on

Time Warner Inc. beat analysts’ profit estimates for the 24th straight quarter as fees for its cable channels and HBO helped offset lower advertising sales.

Fourth-quarter adjusted earnings were 98 cents a share, the New York-based company said Wednesday in a statement. Earnings would have been $1.14 a share excluding restructuring costs and programming charges at Turner. Analysts had predicted 93 cents on average, based on estimates compiled by Bloomberg.

Chief Executive Officer Jeff Bewkes is trying to stimulate growth, offering a new Web-only subscription to HBO this year and making its cable networks such as TNT, TBS and CNN available to subscribers of Dish Network Corp.’s new online TV service. He’s under pressure to keep the company expanding and the stock price rising after rejecting a $75 billion buyout offer last summer from Rupert Murdoch’s 21st Century Fox Inc.

“Solid quarter for Time Warner,” said Paul Sweeney, an analyst at Bloomberg Intelligence. “Affiliate fee revenue continued to be strong for TWX and other media conglomerates, but advertising needs to pick up,” he said, referring to Time Warner by its ticker symbol.

Time Warner forecast adjusted profit of $4.60 to $4.70 a share this year, in line with analysts’ estimates for $4.67. The company also raised its quarterly dividend by 10 percent to 35 cents a share.

The shares rose 1.3 percent to $81.85 at 9:35 a.m. New York time. The stock had gained 30 percent in the past year through Tuesday, giving the company a market value of almost $68 billion.

Time Warner has been cutting jobs to reduce costs, boosting licensing fees and spending more on sports rights, betting that will help retain viewers on networks including TNT, which hosts National Basketball Association games.

Turner Revenue

Fourth-quarter net income fell to $718 million, or 84 cents a share, from $983 million, or $1.06, a year earlier. Revenue dropped 1 percent to $7.53 billion, just shy of the average estimate of $7.54 billion.

Sales at the Turner Broadcasting cable channels increased 2.3 percent to $2.61 billion as subscription fees climbed 5 percent, helping to counter a 1 percent drop in ad revenue. Subscription revenue was driven by an increase in fees it charges pay-TV providers and international expansion.

Revenues at HBO, with shows such as “Game of Thrones” and “True Detective,” increased 6.2 percent to $1.34 billion. The premium network lured more subscribers and licensed its original programming to online streaming sites like Amazon Prime.

The drag on Time Warner’s performance was the Warner Bros. film studio. Sales fell 4.5 percent to $3.82 billion due to lower home movie sales of films like “Edge of Tomorrow” and “Tammy,” compared with last year’s releases of “Man of Steel” and “The Hangover Part III.”

Since taking over the top job in 2008, Bewkes has focused the company on cable networks and the film and TV studio, spinning off entire divisions -- Time Warner Cable Inc., AOL Inc. and most recently the Time Inc. publishing unit in June.