Bloomberg News

Time Warner Lifts Profit Forecast After ‘Lego Movie’ Success (1)

April 30, 2014

Time Warner Inc. (TWX:US) raised its full-year forecast after “The Lego Movie” lured nostalgic adults and families to theaters.

Driven by box-office receipts for “The Lego Movie,” first-quarter earnings rose to 97 cents a share, excluding one-time items and the results of Time Inc., the New York-based company said today in a statement. That beat the 88 cents (TWX:US) a share that analysts had predicted on average.

The Warner Bros. studio’s operating income climbed 40 percent to $369 million, thanks to the animated film based on the Danish building-brick toys that has grossed about $450 million worldwide since it opened in February. Pay-TV distributors like Comcast Corp. also forked out more money to carry programming such as professional basketball playoff games on TNT and HBO’s “Game of Thrones,” the most-watched cable show for the last three weeks.

“We are off to a very strong start in 2014,” Chief Executive Officer Jeff Bewkes said in the statement. “Warner Bros. picked up where it left off after a record-breaking year in 2013, with ‘The Lego Movie’ launching yet another franchise for us.”

Time Warner said it now expects adjusted earnings to expand by a “low teens” percentage, up from a prior projection of a “low double digit” percentage, from $3.51 a share in 2013, a figure that excludes Time Inc. Analysts were estimating (TWX:US) 2014 adjusted earnings of $3.92 a share on average, up 12 percent, according to data compiled by Bloomberg.

On a conference call today, Bewkes said Time Warner will be able to boost adjusted earnings per share by at least a “low to mid-teens” percentage, on average, for the next three to four years.

Time Spinoff

Shares of Time Warner rose 2.7 percent to $66.46 at the close in New York, the biggest one-day gain since Dec. 18. The stock is down 4.7 percent this year.

Bewkes has focused Time Warner’s growth strategy on its cable channels, which accounted for more than 75 percent (TWX:US) of the company’s operating income last year. The rest comes from Warner Bros., which produces movies and TV shows. Bewkes spun off AOL Inc. and Time Warner Cable Inc. after becoming CEO in 2008, and he plans to do the same with magazine publisher Time Inc., the company’s worst-performing division, by the end of June.

First-quarter sales increased to $6.8 billion excluding Time Inc., also surpassing the average analyst estimate of $6.63 billion.

The licensing fees Time Warner gets for its cable channels increased 7 percent at Turner, which includes TBS and CNN, and 8 percent at HBO.

Dish Talks

Advertising sales at Turner rose 5 percent to $51 million as NCAA basketball tournament games helped offset lower ratings. The company also spent 9 percent more on programming, mostly because of the NCAA tournament, including the Final Four on TBS.

Time Warner also disclosed on the conference call that it’s in talks with other companies -- Dish Network Corp., in particular -- about Internet-delivered TV that would sell a cable-like bundle of channels. Bloomberg News reported earlier this month, citing people familiar with the matter, that Dish is targeting a summer debut for its service and was in talks with companies including Time Warner’s Turner.

“We’re not philosophically opposed to that kind of structure but we have to believe it will be additive and sustainable,” Bewkes said on the call. “There are a fair number of questions in terms of the ad model, the quality of service over whichever broadband method they’re thinking about.”

Amazon Deal

The company recently inked a deal to let Amazon.com Inc (AMZN:US) Prime subscribers stream older episodes of some hit HBO series such as “The Sopranos.” It’s the first time that HBO’s TV shows will be available online to viewers who don’t subscribe to the premium network through cable-TV. The agreement was also a blow to Netflix Inc., which had been courting HBO for years.

Time Warner said on today’s call that it plans to reinvest the proceeds from the deal back into programming, marketing and technology. The company didn’t disclose how much the Amazon agreement is worth.

Alan Gould, an analyst with Evercore Partners Inc., said Time Warner’s new forecast fell short of his expectations for a bigger increase given the first-quarter profit beat and HBO’s licensing agreement with Amazon.

Net income (TWX:US) rose to $1.29 billion, or $1.42 a share, from $754 million, or 79 cents, a year ago.

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

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net Cecile Daurat


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Companies Mentioned

  • TWX
    (Time Warner Inc)
    • $85.58 USD
    • -0.20
    • -0.23%
  • AMZN
    (Amazon.com Inc)
    • $303.03 USD
    • -3.25
    • -1.07%
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