Time Warner Raises Dividend as Profit Beats Estimates (Update2)
February 03, 2010, 9:59 AM EST(Adds analyst’s comment in seventh paragraph.)
By Sarah Rabil
Feb. 3 (Bloomberg) -- Time Warner Inc., owner of the Warner Bros. studio and the HBO cable channel, increased its dividend and stock repurchase program after fourth-quarter profit topped analysts’ estimates on films such as “The Blind Side.”
Net income of $627 million, or 53 cents a share, compared with a loss of $16 billion, or $13.41, a year earlier, the New York-based company said today in a statement. Excluding items such as costs to cut magazine jobs, profit rose to 55 cents, beating the 52-cent average of analysts’ estimates compiled by Bloomberg.
Chief Executive Officer Jeffrey Bewkes completed the spinoff of AOL Inc. in December, shedding the Internet unit that had been a drag on profit since the companies’ 2001 merger. Movies also including “Sherlock Holmes” and the DVD release of “Harry Potter and the Half-Blood Prince” helped drive profit and counter declining magazine advertising sales.
“The networks’ fourth quarter was in line, with particular strengths in film,” said Chris Marangi, an analyst with Gabelli & Co. in Rye, New York. “Time Warner has consistently been returning capital to shareholders through the dividend and the buyback.”
The company forecast that 2010 adjusted earnings from continuing operations will increase by a “mid-teens” percentage from $1.83 a share in 2009. Marangi predicted $2.10 a share, or growth of about 15 percent.
2010 Forecast ‘Light’
David Joyce, a New York-based analyst with Miller Tabak & Co. projected $2.34, a 28 percent gain.
The forecast growth is “light,” Joyce, who recommends buying the shares, said in a note to investors.
Time Warner fell 31 cents to $28.20 at 9:36 a.m. in New York Stock Exchange composite trading. The shares climbed 40 percent last year, compared with a 23 percent gain for the Standard & Poor’s 500 Index.
Time Warner raised its quarterly dividend to 21.25 cents a share from 18.75 cents, and boosted its share buyback by $2 billion. Investors have pressed for cash returns since the company received $9.25 billion last March from the spinoff of Time Warner Cable Inc. The company had $4.8 billion of cash and equivalents as of Dec. 31.
Fourth-quarter sales rose 2.2 percent to $7.32 billion, exceeding analysts’ average estimate for $7.2 billion.
Warner Bros. Studio
Sales gained 6.6 percent to $3.32 billion at the Warner Bros. studio. Film revenue topped expectations, driving total sales higher, Joyce, of Miller Tabak, said in an e-mail.
Warner Bros. was the top-grossing studio in the U.S. and Canada last year, pulling in $2.11 billion in box-office sales, according to Box Office Mojo.
In an attempt to add to its film and TV library, Time Warner was among first-round bidders for the Metro-Goldwyn-Mayer Inc. film studio, a person familiar with the matter said last month. MGM, maker of the James Bond movies, put itself up for sale in November as it struggles with $3.7 billion in debt.
Bewkes, 57, trimmed jobs and costs at the Time Inc. magazine unit. Advertising revenue slumped 12 percent at the division in the quarter.
At the cable networks, including TBS, CNN and Cartoon Network, subscriber revenue rose 11 percent and advertising sales fell 4 percent. Michael Morris, an analyst with UBS AG, predicted a 9 percent gain in subscription revenue and a 5 percent decline in ad sales.
In December, Time Inc. joined News Corp., Hearst Corp. and other publishers to form a joint venture to sell magazines and newspapers through a virtual store. The publications are facing an industrywide decline in advertising sales that was heightened by the U.S. recession.
After U.S. markets closed yesterday, News Corp. reported second-quarter profit that beat analysts’ estimates and raised its 2010 earnings forecast after “Avatar” broke box-office records and ad sales increased at the Wall Street Journal.
(The company plans to hold a conference call at 10:30 a.m. New York time, available on {LIVE <GO>}.)
--Editors: Cécile Daurat, Andrea Snyder
To contact the reporter on this story: Sarah Rabil in New York at srabil@bloomberg.net
To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.
