Time Warner Reports Nearly Unchanged Fourth-Quarter Earnings, Beats Expectations

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UPDATED: The entertainment conglomerate, led by CEO Jeffrey Bewkes, posted a record profit year for its studio as the company raised its dividend by 11 percent and unveiled a new stock buyback program.

Shares of Time Warner rose in early Wednesday trading after an earnings report that beat expectations and new moves to reward shareholders. As of 10:50am ET, the stock was up 1.9 percent at $38.82 after it hit a 52-week high of $39.24 earlier in the day.

The company reported slightly higher fourth-quarter earnings that beat Wall Street expectations. For the full year 2011, the company also touted its highest revenue growth since 2003 and a profit record for Warner Bros.

"Our best years are ahead of us," promised chairman and CEO Jeffrey Bewkes in highlighting that the company has focused on its content operations for two years now and vowing that it will continue to see strong momentum. He also said TW would continue to invest in film and TV content.

Bewkes also predicted that the industry would move towards earlier electronic sell-through availability of films in the future without hurting the theatrical window. He further touted a recent agreement to push the start of the Netflix rental window to 56 days after the DVD sales availability of titles.

The entertainment conglomerate posted a fourth-quarter profit of $773 million, compared with $769 million in the year-ago period. On an earnings-per-share basis, the company exceeded analysts' expectations.

Revenue rose 5 percent to $8.2 billion despite some ratings challenges at the company's TV networks unit. Wall Street had on average expected revenue of $8.06 billion.

TW also raised its quarterly earnings by 11 percent to 26 cents per share and unveiled a new $4 billion stock buyback authorization.

TW's full-year revenue increased 8 percent to $29.0 billion, marking the company's highest growth rate since 2003. Adjusted earnings per share for the year grew 20 percent to $2.89.

For the full year 2012, TW forecast stronger earnings-per-share growth in the low double digit percentage range than analysts have expected. Wells Fargo analyst Marci Ryvicker said that this guidance confirms "our above-consensus estimate of $3.21 - consensus is $3.16 as of this morning."

Film unit revenue rose 7 percent in the fourth quarter with adjusted operating income growing 4 percent. The Sherlock Holmes sequel and home entertainment release of the final Harry Potter movie contributed to the results. Revenue from online video services, such as Netflix, also boosted the results. Full-year film profits rose to nearly $1.3 billion, setting a new record.

Bewkes on a conference call said that his company is also excited about its film lineup this year, including The Dark Knight Rises, which he said is selling out midnight showings in July already, Gravity and the first of two releases in The Hobbit franchise. Still, in 2012, operating profits in the film unit may be down though due to the tough 2011 comparisons, management said.

The TV networks unit saw quarterly revenue rise 5 percent, including a 2 percent advertising revenue gain. Ahead of the earnings report, analysts cut their TV ad revenue forecasts for TW after management had said the company would likely miss cable network ad growth guidance of mid-single percentage growth for the fourth quarter. TV networks adjusted operating profit rose 27 percent. Management said that HBO added around 200,000 U.S. subscribers in 2011.

On a conference call with analysts, CFO John Martin said that TV advertising trends seem better in the current quarter than in the fourth as scatter ad prices are up over the upfront.
But he added that ad volume is somewhat soft, making for "mixed signals" overall.

Bewkes said that last year's NCAA tournament in the first year of a partnership with CBS Corp. outperfromed on al fronts - from viewers, digital views, sponsorship and advertising. And so far this year, the company is "very pleased with advertiser demand" for the upcoming tournament. Speaking of basketball, Bewkes said that the NBA lockout did "not diminish fans' enthusiasm at all."

Bewkes also touted record viewership in 2011 for truTV and Adult Swim and a gain of more than 20 percent in key demo viewership for CNN. Fresh programming has also boosted TBS ratings by 30 percent in primetime this year, he added.

Bewkes also said that the entertainment industry must focus on promoting the availability and usage of TV Everywhere, the push to make TV content available on various platforms.

Asked about the role of Apple, Bewkes said: "Apple is great for Time Warner." He cited the tech firm's "great" interfaced devices that allow "better opportunities for consumers" to access our content.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai


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