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Time Warner (TWX) Beats on Q2 Earnings, Ups Outlook
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Time Warner Inc. posted second-quarter 2016 adjusted earnings of $1.29 per share that surpassed the Zacks Consensus Estimate of $1.16, and rose 3% year over year. The company's investments in video content and technology continued to show results. Share repurchase activity and lower effective tax rate also provided cushion to the bottom line. Better-than-expected results prompted management to raise its earnings projection.
Management now envisions adjusted earnings per share for 2016 between $5.35 and $5.45. The company had earlier projected adjusted earnings per share in the range of $5.30–$5.40. The current Zacks Consensus Estimate for 2016 is $5.39.
Including one-time items, earnings per share from continuing operations came in at $1.20 per share, up from $1.16 reported in the prior-year quarter.
Time Warner's total revenue of $6,952 million fell 5% year over year on account of a decline at Warner Bros., partially offset by an increase in revenue at Home Box Office (“HBO”) and Turner. Foreign currency headwinds hurt total revenue by $60 million. Total revenue also came in below the Zacks Consensus Estimate of $7,151 million.
Adjusted operating income came in at $1,760 million, down 5% from the year-ago quarter, whereas adjusted operating margin remained flat at 25.3%.
Time Warner has taken restructuring aggressively. The company is now focusing on original programming, containing costs and increasing investments in key areas to enhance profitability. The company is acquiring a 10% stake in Hulu, a streaming TV service, and informed that it has entered into an affiliate agreement for its full suite of networks comprising TNT, Cartoon Network, CNN and TBS to be available on Hulu’s live-streaming service, which will be launched in 2017. The move comes as pay-TV landscape continues to grapple with increasing number of viewers cutting cord owing to migration to online TV.
Segment Details
Turner division's revenue rose 6% to $3,010 million due to 6% growth in advertising revenue and an 11% increase in subscription revenue, partly offset by a 15% decline in Content and other revenue. Higher advertising revenue reflected domestic growth and local currency growth at Turner’s international networks, partly offset by unfavorable foreign exchange rates. Domestic advertising revenue rose on account of growth at Turner’s news business and the 2016 NCAA Division I Men’s Basketball National Championship. Subscription revenue grew on account of rise in domestic rates and local currency growth at Turner’s international networks, partly offset by foreign currency headwinds and fall in domestic subscribers. The decrease in Content and other revenue was attributable to a fall in domestic licensing revenue.
Adjusted operating income for the segment remained almost flat at $1,133 million compared with the year-ago quarter as increase in revenue was offset by higher expenses.
Time Warner's HBO segment revenue climbed 2% to $1,467 million driven by growth of 6% in subscription revenue, partly offset by 17% decline in content and other revenue. Higher subscription revenue was primarily attributed to a rise in domestic rates and subscribers and international growth. On the other hand, content and other revenue decreased due to a fall in domestic licensing revenue, partly offset by increase in international licensing revenue.
Adjusted operating income for the division fell 5% to $481 million due to higher expenses. The increase in expenses was primarily attributed to rise in programming expenses.
Warner Bros. revenue plummeted 19% to $2,658 million on account of fall in videogames, home entertainment and television licensing revenues. Videogames revenue fell as the year-ago quarter included the releases of Batman: Arkham Knight and Mortal Kombat X. Home entertainment revenues decreased on account of fewer theatrical home video releases in the quarter. Television licensing revenues declined as the year-ago period gained from the second-cycle syndication of The Big Bang Theory and the subscription video-on-demand licensing of Seinfeld.
Adjusted operating income for the division plunged 37% to $217 million.
Time Warner ended the quarter with cash and equivalents of $2,496 million, long-term debt of $24,418 million, and shareholders' equity of $23,888 million, excluding non-controlling interest of $1 million.
During the quarter, Time Warner incurred capital expenditures of $87 million and generated free cash flow of $1,140 million. From Jan 1, 2016 through Jul 29, 2016, the company bought back about 23 million shares, aggregating approximately $1.6 billion. As of Jul 29, 2016, the company still had approximately $3.4 billion remaining under its share buyback program.
Time Warner, which shares space with Twenty-First Century Fox, Inc. (FOXA - Free Report) , Viacom, Inc. and The Walt Disney Company (DIS - Free Report) , currently carries a Zacks Rank #3 (Hold).
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Time Warner (TWX) Beats on Q2 Earnings, Ups Outlook
Time Warner Inc. posted second-quarter 2016 adjusted earnings of $1.29 per share that surpassed the Zacks Consensus Estimate of $1.16, and rose 3% year over year. The company's investments in video content and technology continued to show results. Share repurchase activity and lower effective tax rate also provided cushion to the bottom line. Better-than-expected results prompted management to raise its earnings projection.
Management now envisions adjusted earnings per share for 2016 between $5.35 and $5.45. The company had earlier projected adjusted earnings per share in the range of $5.30–$5.40. The current Zacks Consensus Estimate for 2016 is $5.39.
Including one-time items, earnings per share from continuing operations came in at $1.20 per share, up from $1.16 reported in the prior-year quarter.
Time Warner's total revenue of $6,952 million fell 5% year over year on account of a decline at Warner Bros., partially offset by an increase in revenue at Home Box Office (“HBO”) and Turner. Foreign currency headwinds hurt total revenue by $60 million. Total revenue also came in below the Zacks Consensus Estimate of $7,151 million.
Adjusted operating income came in at $1,760 million, down 5% from the year-ago quarter, whereas adjusted operating margin remained flat at 25.3%.
Time Warner has taken restructuring aggressively. The company is now focusing on original programming, containing costs and increasing investments in key areas to enhance profitability. The company is acquiring a 10% stake in Hulu, a streaming TV service, and informed that it has entered into an affiliate agreement for its full suite of networks comprising TNT, Cartoon Network, CNN and TBS to be available on Hulu’s live-streaming service, which will be launched in 2017. The move comes as pay-TV landscape continues to grapple with increasing number of viewers cutting cord owing to migration to online TV.
Segment Details
Turner division's revenue rose 6% to $3,010 million due to 6% growth in advertising revenue and an 11% increase in subscription revenue, partly offset by a 15% decline in Content and other revenue. Higher advertising revenue reflected domestic growth and local currency growth at Turner’s international networks, partly offset by unfavorable foreign exchange rates. Domestic advertising revenue rose on account of growth at Turner’s news business and the 2016 NCAA Division I Men’s Basketball National Championship. Subscription revenue grew on account of rise in domestic rates and local currency growth at Turner’s international networks, partly offset by foreign currency headwinds and fall in domestic subscribers. The decrease in Content and other revenue was attributable to a fall in domestic licensing revenue.
Adjusted operating income for the segment remained almost flat at $1,133 million compared with the year-ago quarter as increase in revenue was offset by higher expenses.
Time Warner's HBO segment revenue climbed 2% to $1,467 million driven by growth of 6% in subscription revenue, partly offset by 17% decline in content and other revenue. Higher subscription revenue was primarily attributed to a rise in domestic rates and subscribers and international growth. On the other hand, content and other revenue decreased due to a fall in domestic licensing revenue, partly offset by increase in international licensing revenue.
Adjusted operating income for the division fell 5% to $481 million due to higher expenses. The increase in expenses was primarily attributed to rise in programming expenses.
Warner Bros. revenue plummeted 19% to $2,658 million on account of fall in videogames, home entertainment and television licensing revenues. Videogames revenue fell as the year-ago quarter included the releases of Batman: Arkham Knight and Mortal Kombat X. Home entertainment revenues decreased on account of fewer theatrical home video releases in the quarter. Television licensing revenues declined as the year-ago period gained from the second-cycle syndication of The Big Bang Theory and the subscription video-on-demand licensing of Seinfeld.
Adjusted operating income for the division plunged 37% to $217 million.
TIME WARNER INC Price, Consensus and EPS Surprise
TIME WARNER INC Price, Consensus and EPS Surprise | TIME WARNER INC Quote
Other Financial Aspects
Time Warner ended the quarter with cash and equivalents of $2,496 million, long-term debt of $24,418 million, and shareholders' equity of $23,888 million, excluding non-controlling interest of $1 million.
During the quarter, Time Warner incurred capital expenditures of $87 million and generated free cash flow of $1,140 million. From Jan 1, 2016 through Jul 29, 2016, the company bought back about 23 million shares, aggregating approximately $1.6 billion. As of Jul 29, 2016, the company still had approximately $3.4 billion remaining under its share buyback program.
Time Warner, which shares space with Twenty-First Century Fox, Inc. (FOXA - Free Report) , Viacom, Inc. and The Walt Disney Company (DIS - Free Report) , currently carries a Zacks Rank #3 (Hold).
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