Time Warner Profit Jump Leaves Wall St. Unfazed

Time Warner Inc. Chief Executive Richard Parsons told analysts Friday that the world’s largest media company had finally turned the corner, a performance capped by a 76% jump in fourth-quarter earnings.

Wall Street, though, was decidedly unimpressed.

Excluding one-time gains and charges, analysts noted, operating earnings for the quarter rose a mere 2.9%.

Jessica Reif Cohen, who follows the media industry for Merrill Lynch & Co., described the showing as “lackluster.”

Shares of New York-based Time Warner were down 12 cents at $18.04 on the New York Stock Exchange.

Investors evidently were disappointed that profit targets for 2005 were in the single digits.

“Short-term, it’s ho-hum,” Reif Cohen said, noting that she expected results to improve as the year went along.

Some are also concerned about the logic behind Time Warner’s $17-billion joint bid with Comcast Corp. for Adelphia Communications Corp.’s cable operations.

For his part, Parsons chose to focus on the positive.

“2004 was the year the company settled down, got the past behind it and got focused on its businesses,” he said. “We’ve charted the course; now we are going to stay the course.”

In recent months, Time Warner has negotiated a tentative settlement with federal regulators over accounting practices at its Internet unit, America Online Inc.

What’s more, most of its businesses are growing.

For the quarter that ended Dec. 31, net income was $1.13 billion, or 24 cents a share. That compared with $639 million, or 14 cents a share, a year earlier.

Revenue increased 1.9% to $11.1 billion from $10.9 billion.

Time Warner’s bottom line was boosted in part because the company was no longer burdened with big losses from its music division, which was sold last year to a group of investors led by Edgar Bronfman Jr.

Earnings were also lifted by higher operating income at AOL, up 9%; television networks, up 10%; the company’s cable business, up 32%; and its publishing unit, up 31%.

“They had a great year,” said Jeffrey Logsdon, media analyst with Harris Nesbitt. “Their first half of the year was exceptional, and the second half was normal. But sometimes investors get less than enthusiastic with normal earnings.”

For the full year, Time Warner earned $3.36 billion, or 72 cents a share, up from $2.64 billion, or 57 cents, in 2003. Revenue climbed 6% to $42.1 billion.

“Across the board,” Logsdon said, “their businesses are very healthy.”

The fourth-quarter results revealed a particular weak spot.

Operating profit at the company’s Warner Bros. movie and TV studios fell 36% during the period to $201 million. Revenue declined 3% to $3.3 billion.

Analysts said film-segment profit was softer than expected. That was primarily because of such expensive box-office disappointments as “Alexander” and “Catwoman.”

The film unit also faced a difficult comparison with the same period a year earlier. That’s when “Lord of the Rings: Return of the King,” “Elf” and “Texas Chainsaw Massacre” were in movie theaters.

Executives also pointed out that the TV hit “Friends” was no longer on the air.