Time Warner easily beats Wall Street’s expectations
Time Warner Inc. reported third-quarter results that sailed past Wall Street projections as the media giant garnered higher fees for its television channels and movies.
The New York company posted third-quarter profit, after stripping out one-time items and the cost of severance packages, of 97 cents a share. Analysts had been expecting earnings of 94 cents. Revenue during the July-through-September quarter rose 3% to $6.24 billion.
Time Warner also raised its full-year outlook, which helped send shares up $3.02, or 4%, to $77.99 in trading on the New York Stock Exchange.
The results appear to back Chief Executive Jeff Bewkes, who has been making the case to Wall Street that Time Warner is more valuable as an independent company. He fended off an $85-a-share buyout offer from Rupert Murdoch’s 21st Century Fox in August.
After years of spinning off assets to shrink Time Warner down to its cable networks, HBO and the Warner Bros. studio, Bewkes is aggressively cutting costs. The company is eliminating 2,600 jobs, or about 10% of its workforce, in a move that should provide about $450 million in savings.
Bewkes is also pushing content online after recently unveiling plans to offer HBO as a stand-alone Internet streaming product beginning next year.
During the quarter, Warner Bros. film and TV studio revenue grew 3% to $2.8 billion. The company attributed the gain to big checks from streaming services for Warner Bros. TV shows as well as higher license fees for its movies.
But the studio’s results experienced a drag from softer box-office sales during the quarter when the studio released “Tammy,” “If I Stay” and “Into the Storm.” Those films were no match for “Pacific Rim,” “The Conjuring” and “We’re the Millers,” which the studio released in the third quarter of 2013.
Studio operating income declined 23% to $237 million.
HBO had a strong quarter, trumping expectations. Revenue for HBO, whose programs include “Game of Thrones” and “The Newsroom,” increased 10% to $1.3billion. However, operating income declined 24% to $380 million, in part because of a one-time gain in the year-earlier period.
Turner Broadcasting revenue increased 5% to $2.4 billion. The unit benefited from higher fees charged to cable and satellite TV operators to carry the Turner channels. During the quarter, Turner took a massive $482-million programming write-down for reruns of “The Mentalist” on TNT and other shows that crashed and burned.
During the earnings call, Time Warner executives addressed the blackout of several of its Turner Broadcasting channels from satellite TV giant Dish Network. The two companies have been involved in an increasingly contentious distribution contract dispute for several Turner channels, including CNN and Cartoon Network.
Dish dropped the channels two weeks ago when the two companies could not agree on an extension. On Tuesday, Dish Chairman Charlie Ergen made headlines when he told analysts that he wasn’t sure CNN still was a must-carry network.
Turner Broadcasting Chief Executive John Martin called Ergen’s comments “very antagonistic and aggressive.”
“We disagreed with virtually everything he said as it related to the importance of our product,” Martin said.
Time Warner Chief Financial Officer Howard M. Averill quickly added that the company expects to “reach a deal” with Dish.
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