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Time Warner's Strategic Initiatives Bode Well for the Stock

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Time Warner Inc.’s foray into new markets, strategic investments in video content and technology, along with digital endeavors bode well for the stock. We observed that the shares of this diversified media conglomerate have not only outperformed the Zacks categorized Media Conglomerates industry, which occupies a space in the top 25% of the Zacks Classified industries (65 out of the 256) but also the broader sector in the past one year.

Over the said period, the stock has increased 34.9%, while the industry has advanced 16.6%. While the broader Consumer Discretionary sector of which both are part of, gained 14.6% in the same time frame. Additionally, the stock’s long-term earnings growth rate of 9.2% and a VGM Score of “B” reflect its inherent strength.

Let’s Take a Close Look

Time Warner’s initiative to foray into new markets has been helping in broadening client base and product portfolio. Management is now concentrating on enhancing reach in the existing territories, through investments in local production and gaining distribution rights for new networks. Moreover, rising demand of its content from distributors and other cable or satellite providers is augmenting the revenues. Game of Thrones is all set to return for its highly anticipated seventh season on Jul 16 and will be premiered on HBO.

Time Warner, which accepted the buyout offer of AT&T Inc. (T - Free Report) , is also boosting broadband distribution capabilities. Further, the company 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. Moreover, the company launched subscription video-on-demand service called FilmStruck, which features the largest streaming library of Contemporary & Classic Arthouse, Indie, Foreign & Cult Films.

Further, Time Warner’s Turner Broadcasting and CBS Corporation extended the rights to air The National Collegiate Athletic Association ("NCAA") Men's Division I Basketball Tournament, through 2032. With more viewership and higher advertising revenues, the company is well poised for top-line growth.

Additionally, this Zacks Rank #3 (Hold) company has been expanding digital presence to facilitate consumers to enjoy content in more platforms and devices. All these factors have enabled Time Warner to post better-than-expected bottom-line in 20 straight quarters, as it reported fourth-quarter 2016 results.

However, decline in overall advertising spending and currency headwinds may adversely impact the company’s performance. Technology advancements, rapid growth in new video services and shift in consumer viewing patterns, may also pose threats to the company.

Stock that Warrants a Look

A better-ranked stock includes Cable ONE, Inc. (CABO - Free Report) , which has surged 48.2% in the past one year. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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