Bloomberg News

Time Warner Beats Profit Estimates, Plans $4 Billion Buyback

February 09, 2012

(Updates with closing share price in fifth paragraph.)

Feb. 8 (Bloomberg) -- Time Warner Inc., owner of the HBO cable-TV channel, reported fourth-quarter profit that topped analysts’ estimates as subscription fees for television shows improved, and it announced a new share buyback of $4 billion.

Net income rose 0.5 percent to $773 million, or 76 cents a share, from $769 million, or 68 cents, a year earlier, the New York-based company said today in a statement. Excluding some items, profit of 94 cents a share beat the 87-cent average of analysts’ predictions compiled by Bloomberg.

Time Warner, which through its Warner Bros. unit produces “The Big Bang Theory” TV series, derives more than 70 percent of annual operating income from television. Led by Chief Executive Officer Jeffrey Bewkes, the owner of CNN and TNT said last quarter’s advertising sales rose 2 percent at the networks unit, driven by international growth. Subscription fees for TV shows advanced 5 percent.

The company also raised its quarterly dividend by 11 percent to 26 cents a share. The company sees 2012 growth in earnings excluding some items in the “low double-digit” range, from a base of $2.89 a share. Analysts expected a gain of about 9 percent.

Time Warner climbed 1 cent to $38.11 at the close in New York. The shares have risen 5.5 percent this year.

Buyback ‘a Positive’

Time Warner’s repurchase program and dividend increase answered concerns that the rate of return on capital was peaking, David Bank, analyst with RBC Capital Markets in New York, said in a telephone interview. “That’s definitely a positive,” said Bank, who rates the shares “outperform.”

Advertising growth was weak compared against gains at Walt Disney Co., Paul Sweeney, senior media analyst at Bloomberg Industries, said in an e-mail. “Time Warner said growth is coming from international, so domestic actually might be down,” Sweeney said. “That is the only potential weak spot I see.”

Box office results for Warner Bros., which released films “Sherlock Holmes: A Game of Shadows” and “Happy Feet Two” at the end of the year, declined 39 percent to $369.2 million in the fourth quarter compared with a year earlier, according to research firm Box Office Mojo. The end of the studio’s “Harry Potter” franchise will make for tough comparisons this year, according to Alexia Quadrani, a JPMorgan & Co. analyst.

“The studio did alright, but it was tough because of Harry Potter last year,” said Quadrani, who spoke in a telephone interview before the results were released. “At the same time, there’s early interest in the next Batman film and their TV business is doing well overall,” said Quadrani, who rates the shares “overweight” and doesn’t own any.

Fourth-quarter sales increased 4.9 percent to $8.19 billion. Analysts had expected $8.04 billion. The adjusted earnings exclude items such as impairments of goodwill and costs related to mergers, acquisitions, investments or dispositions.

--Editors: Cecile Daurat, Niamh Ring, Bob Brennan

To contact the reporter on this story: Edmund Lee in New York at elee310@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net


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