Time Warner Tops Estimates, Shares Fall on Lowered Outlook

  • Time Warner sees $5.25 a share after `close to $6' guidance
  • Revenue growth led by HBO premium channel and Warner Bros.

Time Warner Inc. posted third-quarter earnings that beat analysts’ estimates, though shares plummeted after the company reduced its outlook for next year.

Profit excluding some items was $1.25 a share, the New York-based company said Wednesday in a statement. Analysts predicted $1.09, the average of projections compiled by Bloomberg.

Yet the shares of Time Warner plunged 6.6 percent in New York Wednesday after the company announced during an earnings call that it was lowering its 2016 earnings outlook.

Time Warner’s earnings are “more likely” to be about $5.25 a share next year, down from the “close to $6” forecast it had stuck to for the past year, mostly because of the impact of foreign exchange rates and increased investments in programming, Chief Executive Officer Jeff Bewkes said on the earnings conference call.

The shares sank 6.6 percent to $72.20, their biggest single-day decline since Aug. 5. The stock has dropped 15 percent this year, while the Standard & Poor’s 500 Index has gained 2.1 percent.

In August, Time Warner fell after the company didn’t raise its full-year profit forecast, even though it reported second-quarter earnings that topped analysts’ estimates by a wide margin. Investors sold off media stocks over the summer amid concerns over the growth of Walt Disney Co.’s ESPN and declining video subscribers at pay-TV providers.

Hit Shows, Sports Rights

Chief Executive Officer Jeff Bewkes’s strategy has been to create original hit shows and acquire sports programming rights to demand higher fees for its cable channels from pay-TV distributors. Bewkes has spun off assets in recent years, shrinking Time Warner down to its Turner cable channels, HBO and the movie studio. Last year, the company rejected a $75 billion buyout offer from Rupert Murdoch’s 21st Century Fox Inc.

Time Warner has also been seeking new ways to sell its content online, distributing its Turner channels -- CNN, TNT, TBS and Cartoon Network -- on Dish Network Corp.’s Sling TV service and introducing a Web-only version of HBO in April. On Tuesday, HBO said it signed a four-year deal with former “Daily Show” host Jon Stewart, who will make short-form videos based on current events for HBO’s digital services.

Revenue rose 5 percent to $6.6 billion, compared with the average estimate of $6.51 billion.

Sales at Turner fell 2 percent to $2.4 billion partly as a result of declines in subscribers for its cable channels. Turner’s U.S. advertising revenue was flat, while the fees it gets from TV distributors like Comcast Corp. and DirecTV slipped 1 percent.

Sales at HBO, with shows such as “Game of Thrones,” increased 5 percent to $1.4 billion, helped by higher domestic rates and licensing programming to Amazon.com Inc. HBO’s profit rose 37 percent to $519 million as the network saved on severance and programming costs.

Sales at Warner Bros. studio rose 15 percent to $3.2 billion, led by video games sales and licensing deals for shows it produces, such as “Blindspot” and “Supergirl,” for the broadcast channels NBC and CBS. The studio was also the top video game publisher in the U.S. through the first three quarters of this year, the company said.

Net income climbed to $1 billion from $967 million a year earlier.

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