Time Warner 2nd-Quarter Profit Triples to $101 Million

Time Warner Inc. said its second-quarter net income tripled, beating analysts’ forecasts, on strong advertising at its cable television channels and magazines and higher revenue from distributing TV programs.

Net income at the world’s largest media and entertainment company rose to $101 million, or 4 cents a share after the payment of preferred dividends. The results included a 5-cent gain from the sale of a cable system, analysts said. The company was expected to show a loss of 4 cents.

Time Warner’s cable channels, including TNT, TBS and others acquired with Turner Broadcasting Systems Inc. in 1996, had record operating profit, and the company benefited from gains at magazines such as Fortune and People. Revenue rose 10% to $6.53 billion as the gains from cable and magazines more than offset declines at Time Warner’s music business.

“These guys are as close to firing on all cylinders as you can get,” said Mark Greenberg, who manages the Invesco Leisure Fund, whose fifth-largest holding is Time Warner. “If [Time Warner] keeps coming through with these numbers--and I think they will--the stock is going to go higher.”

Time Warner shares rose $1.88 to $93.13 on the New York Stock Exchange.

While Warner Bros.’ film studio has suffered from a series of disappointing movies, its television production business has done well, leading to an 11% rise in cash flow to a record $122 million.

Cash flow at Time Warner’s cable business, the nation’s largest with 12 million customers, rose 29% to a record $448 million. That was helped by asset sales that added about $70 million. Time Warner didn’t say what effect that had on its overall results.

Warner Music Group, meanwhile, continued to struggle, posting a 9% decline in cash flow to $96 million. The division’s business showed signs of a recovery with higher domestic and international demand. The problem this quarter came from lower results in its direct-marketing business, which includes the Columbia House record club.

The results may push Chairman and Chief Executive Gerald Levin to begin a stock buyback plan promised to shareholders, analysts said.

“I’d say the outlook for Time Warner never looked better,” said Merrill Lynch & Co. analyst Jessica Reif Cohen, who has a “buy” rating on the stock.

Time Warner made money last year for the first time since 1992, helped by the addition of the Turner cable networks, a cost-cutting program and a strong economy that has lifted advertising for all media companies. The company last reported a per-share profit in 1988.

The improved financial performance--and the reduction of $2 billion of debt in the last year--has caught the attention of debt-rating companies. Duff & Phelps Credit Rating Co. on Tuesday boosted its credit rating to “BBB” from “BBB-.”

Time Warner executives also have said that once a solid investment-grade rating is attained on the remaining $16 billion in debt, the company may scale back its debt-reduction efforts and even make small acquisitions.

Levin, for now, has ruled out a big acquisition similar to the $7 billion purchase of Ted Turner’s company.