Time Warner (TWX) Q1 Earnings & Revenues Beat Estimates

Time Warner Inc. (NYSE:TWX) , which accepted the buyout offer of AT&T, Inc. (NYSE:T) , posted first-quarter 2017 adjusted earnings of $1.66 per share that surpassed the Zacks Consensus Estimate of $1.44, and surged 11% from the prior-year period. The company's investments in video content and technology continued to show results.

Including one-time items, earnings per share from continuing operations came in at $1.80 per share, up significantly from $1.46 reported in the prior year quarter.

Time Warner's total revenue of $7,735 million increased 6% year over year on account of growth witnessed across Home Box Office (“HBO”), Warner Bros. and Turner. Total revenue also came ahead of the Zacks Consensus Estimate of $7,660 million.

Adjusted operating income came in at $2,153 million, up 7% from the year-ago quarter, whereas adjusted operating margin expanded 30 basis points to 27.8%.

Time Warner has taken restructuring aggressively. The company is now focusing on original programming, containing costs and increasing investments in key areas to enhance profitability. The quarter also benefited from the success of “Kong: Skull Island” and “The LEGO Batman Movie”. Turner and Warner Bros. together launched new domestic premium video subscription service – Boomerang – that offers over 5,000 animated titles on a streaming platform.

We observed that the stock has outperformed the Zacks categorized Media Conglomerates industry in the past one year. Over the said period, the stock has increased 32.5%, while the industry has advanced 15.1%.

Segment Details

Turner division's revenue rose 6% to $3,088 million due to 12% increase in subscription revenue and 16% jump in Content and other revenue, partly offset by 2% decline in advertising revenue. Subscription revenue grew on account of rise in domestic rates and growth at Turner’s international networks, partly offset by fall in domestic subscribers. The increase in Content and other revenue was attributable to rise in domestic licensing revenue. Advertising revenue tumbled on account of fall in delivery at certain domestic networks, partly offset by increases at Turner’s sports and news businesses and growth at Turner’s international networks.

Adjusted operating income for the segment declined 4% to $1,187 million compared with the year-ago quarter.

Time Warner's HBO segment revenue climbed 4% to $1,568 million driven by growth of 5% in subscription revenue, partly offset by 1% fall in Content and other revenue. Higher subscription revenue was primarily attributed to a rise in domestic rates and subscribers, and international growth. The decline in Content and other revenue reflects fall in home entertainment revenue, partly offset by rise in licensing revenue.

Adjusted operating income for the division soared 22% to $595 million.

Warner Bros. revenue jumped 8% to $3,365 million on account of increased television and theatrical revenues partly offset by fall in videogames revenue. The increase in television revenue is attributable to rise in domestic licensing revenues. Theatrical revenue jumped due to higher number and the mix of box office releases, which included “Kong: Skull Island” and “The LEGO Batman Movie”, as well as rise in home entertainment revenue mainly related to the release of “Fantastic Beasts and Where to Find Them”. Videogames revenue decreased on account of lower number and the mix of releases in the current year period and fall in carryover revenue.

Adjusted operating income for the division surged 20% to $510 million.

Other Financial Aspects

Time Warner ended the quarter with cash and equivalents of $1,450 million, long-term debt of $22,402 million and shareholders' equity of $25,425 million, excluding non-controlling interest of $2 million. During the quarter, Time Warner incurred capital expenditures of $98 million and generated free cash flow of $1,370 million.

Zacks Rank

Time Warner carries a Zacks Rank #3 (Hold). Better ranked stocks in the space include Cable ONE, Inc. (NYSE:CABO) sporting a Zacks Rank #1 (Strong Buy) and Salem Media Group, Inc. (NASDAQ:SALM) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cable ONE delivered an average positive earnings surprise of 4.7% in the trailing four quarters and has a long-term earnings growth rate of 3%.

Salem Media Group delivered an average positive earnings surprise of 53.8% in the trailing four quarters.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>