Analysts: Time Warner to Take Write-Down of Up to $35 Million for HBO's Canceled 'Luck'
LONDON -- Time Warner will take a write-down in the $30 million-$35 million range for HBO's short-lived horse racing drama Luck when it reports its first-quarter financials, Wall Street analysts predict.
Barclays Capital analyst Anthony DiClemente, who has an "equal weight" rating and $39 target price on Time Warner's stock, said in a report Tuesday that he and his team "expect a bad Luck write-down" due to the reduced value of the program of between $30 million and $35 million at the entertainment conglomerate's networks division. "As a result, we are lowering our first-quarter networks adjusted operating income assumption to $1.2 billion from $1.23 billion," he said.
Luck, starring Dustin Hoffman, was canceled in mid-March after the deaths of three horses.
Vasily Karasyov, analyst at Susquehanna Financial Group, on Tuesday also updated his quarterly forecast for TW. "On the negative side, we now expect TW to record a programming write-down of $35 million in the quarter, all related to one discontinued show," he wrote. But Karasyov emphasized that the cancellation came "for reasons other than its performance."
On the positive side, he said that revenue trends at the TW networks improved during the fourth quarter. "We estimate that advertising revenue growth accelerated to 5 percent," Karasyov said. "TBS posted the first quarter of total-day audience growth since the second quarter 2009, which, if sustainable, should allow for multiple expansion." He maintained his "positive" rating on TW shares and a $45 price target.
Davenport & Co. analyst Michael Morris, who has a "neutral" rating and $41 target on the stock, had on Monday already lowered his operating profit estimate for TW's networks by about $30 million to account for a Luck write-down. “Our estimate reflects current season costs and the yet unamortized portion of season one," he wrote.
A TW spokesman was not available for comment.