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3 Key Takeaways From Time Warner's (TWX) Earnings Report

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On Wednesday, Time Warner Inc. released its second quarter 2016 results before the markets opened, sending its stock up more than 3.5% higher in morning trade. The media conglomerate delivered lower-than-expected revenue figures, but raised its guidance for the rest of the year. Let’s take a look at three key takeaways from TWX’s recently released earnings report.

1.       EPS beats estimates

Adjusted earnings for the quarter came in at $1.29 per share, which easily beat the Zacks Consensus Estimate of $1.16 per share and rose 3.2% year-over-year. The company’s net income fell to $951 million, or $1.20 per share, from $971 million, or $1.16 per share a year earlier.

2.       Revenues miss estimates, but full-year guidance increases

Time Warner’s revenues decreased 5.4% year-over-year to $6.95 billion, and also missed the Zacks Consensus Estimate of $7.15 billion. The decline and miss can both be attributed to a decline at Warner Bros movie studio. The company did increase its full-year guidance though, saying that it now expects adjusted profit for the year of $5.35-$5.45 per share. Its previous forecast was between $5.30 and $5.40 per share. The Zacks Consensus Estimate for full-year EPS is $5.39.

3.       A 10% stake in Hulu announced

Also in its earnings report, Time Warner announced that it was buying a 10% stake in Hulu, and that it had signed an agreement for all of its Turner networks to be carried on Hulu’s live-streaming service. The company did not disclose the financial terms of the deal, however it was reported that Time Warner was paying about $580 million for the stake, which would give Hulu a valuation of about $6 billion.  TWX now joins Walt Disney Co. (DIS - Free Report) , 21st Century Fox Inc. , and Comcast Corp. (CMCSA - Free Report) as a shareholder in Hulu.

Bottom Line

Overall investors seemed to like what they saw in Time Warner’s earnings report, which helped the shares of the company edge higher. The company’s move into Hulu is seen as an added positive to its profit numbers and upbeat guidance, and the move comes at a time when consumers are increasingly moving from traditional cable packages to services like Hulu, HBO Now, and of course Netflix (NFLX - Free Report) . Time Warner continues to make sure the Turner networks have the widest possible distribution, but are doing so without compromising too much traditional cable and satellite offerings, and it seems to be paying off.

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