A month has gone by since the last earnings report for Time Warner Inc. . Shares have added about 2.2% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Time Warner Q4 Earnings & Revenues Beat Estimates
Time Warner posted fourth-quarter 2016 adjusted earnings of $1.25 per share that surpassed the Zacks Consensus Estimate of $1.19, and improved 18% from the prior-year period. The company's investments in video content and technology continued to show results.
Including one-time items, earnings per share from continuing operations came in at $0.40 a share, down significantly from $1.06 reported in the prior year quarter.
Time Warner's total revenue of $7,891 million increased 11% year over year on account of growth witnessed across Home Box Office (“HBO”), Warner Bros. and Turner. Foreign currency headwinds hurt total revenue by $110 million. Total revenue also came ahead of the Zacks Consensus Estimate of $7,752 million.
Adjusted operating income came in at $1,759 million, up 25% from the year-ago quarter, while adjusted operating margin expanded 250 basis points to 22.3%.
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. We observed that the stock has outperformed the Zacks categorized Media Conglomerates industry in the past one year. Over the said period, the stock has increased 52.2%, while the industry has advanced 27.4%.
Segment Details
Turner division's revenue rose 7% to $2,838 million due to 14% increase in subscription revenue and 9% jump in Content and other revenue, partly offset by 2% decline in advertising revenue.
Subscription revenue grew on account of rise in domestic rates and growth at Turner’s international networks, partly offset by fall in domestic subscribers. The increase in Content and other revenue was attributable to higher licensing revenue. Advertising revenue tumbled on account of declines at Turner’s international networks. Domestic advertising was even with growth witnessed across Turner’s news business neutralized by lower delivery at certain entertainment networks and lower revenues with respect to the MLB postseason games.
Adjusted operating income for the segment went up 9% to $851 million compared with the year-ago quarter.
Time Warner's HBO segment revenue climbed 6% to $1,491 million driven by growth of 5% in subscription revenue and 7% in content and other revenue. Higher subscription revenue was primarily attributed to a rise in domestic rates and international growth. The jump in Content and other revenue reflects rise in home entertainment revenue, partly negated by fall in international licensing revenues. Adjusted operating income for the division rose 10% to $431 million.
Warner Bros. revenue advanced 17% to $3,868 million on account of increase in theatrical revenue that gained from the releases of Fantastic Beasts and Where to Find Them and The Accountant, and increase in television revenue, principally due to rise in licensing revenue and higher production. Adjusted operating income for the division surged 57% to $586 million.
Other Financial Aspects
Time Warner ended the quarter with cash and equivalents of $1,539 million, long-term debt of $22,392 million and shareholders' equity of $24,335 million, excluding non-controlling interest of $2 million.
During the quarter, Time Warner incurred capital expenditures of $162 million and generated free cash flow of $1,034 million. In 2016, the company bought back about 31 million shares, aggregating approximately $2.3 billion. In fact, the company stopped making any repurchases since Oct 23, 2016 due to the pending merger.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
VGM Scores
At this time, Time Warner's stock has an average Growth Score of 'C', however its Momentum is doing a bit better with an 'B'. Charting the exact same path, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for momentum and value investors while also being suitable for those looking for growth to a lesser degree.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
Image: Bigstock
Why Is Time Warner (TWX) Up 2.2% Since the Last Earnings Report?
A month has gone by since the last earnings report for Time Warner Inc. . Shares have added about 2.2% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Time Warner Q4 Earnings & Revenues Beat Estimates
Time Warner posted fourth-quarter 2016 adjusted earnings of $1.25 per share that surpassed the Zacks Consensus Estimate of $1.19, and improved 18% from the prior-year period. The company's investments in video content and technology continued to show results.
Including one-time items, earnings per share from continuing operations came in at $0.40 a share, down significantly from $1.06 reported in the prior year quarter.
Time Warner's total revenue of $7,891 million increased 11% year over year on account of growth witnessed across Home Box Office (“HBO”), Warner Bros. and Turner. Foreign currency headwinds hurt total revenue by $110 million. Total revenue also came ahead of the Zacks Consensus Estimate of $7,752 million.
Adjusted operating income came in at $1,759 million, up 25% from the year-ago quarter, while adjusted operating margin expanded 250 basis points to 22.3%.
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. We observed that the stock has outperformed the Zacks categorized Media Conglomerates industry in the past one year. Over the said period, the stock has increased 52.2%, while the industry has advanced 27.4%.
Segment Details
Turner division's revenue rose 7% to $2,838 million due to 14% increase in subscription revenue and 9% jump in Content and other revenue, partly offset by 2% decline in advertising revenue.
Subscription revenue grew on account of rise in domestic rates and growth at Turner’s international networks, partly offset by fall in domestic subscribers. The increase in Content and other revenue was attributable to higher licensing revenue. Advertising revenue tumbled on account of declines at Turner’s international networks. Domestic advertising was even with growth witnessed across Turner’s news business neutralized by lower delivery at certain entertainment networks and lower revenues with respect to the MLB postseason games.
Adjusted operating income for the segment went up 9% to $851 million compared with the year-ago quarter.
Time Warner's HBO segment revenue climbed 6% to $1,491 million driven by growth of 5% in subscription revenue and 7% in content and other revenue. Higher subscription revenue was primarily attributed to a rise in domestic rates and international growth. The jump in Content and other revenue reflects rise in home entertainment revenue, partly negated by fall in international licensing revenues. Adjusted operating income for the division rose 10% to $431 million.
Warner Bros. revenue advanced 17% to $3,868 million on account of increase in theatrical revenue that gained from the releases of Fantastic Beasts and Where to Find Them and The Accountant, and increase in television revenue, principally due to rise in licensing revenue and higher production. Adjusted operating income for the division surged 57% to $586 million.
Other Financial Aspects
Time Warner ended the quarter with cash and equivalents of $1,539 million, long-term debt of $22,392 million and shareholders' equity of $24,335 million, excluding non-controlling interest of $2 million.
During the quarter, Time Warner incurred capital expenditures of $162 million and generated free cash flow of $1,034 million. In 2016, the company bought back about 31 million shares, aggregating approximately $2.3 billion. In fact, the company stopped making any repurchases since Oct 23, 2016 due to the pending merger.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Time Warner Inc. Price and Consensus
Time Warner Inc. Price and Consensus | Time Warner Inc. Quote
VGM Scores
At this time, Time Warner's stock has an average Growth Score of 'C', however its Momentum is doing a bit better with an 'B'. Charting the exact same path, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for momentum and value investors while also being suitable for those looking for growth to a lesser degree.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.