Time Warner Second-Quarter Earnings Rise, Beat Expectations

Jeff Bewkes | Time Warner
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2010 Pay: $26.3 million (+34.2% from 2009)
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UPDATED: The entertainment conglomerate, led by CEO Jeffrey Bewkes, also posted higher revenue and increased its full-year forecast.

Time Warner on Wednesday reported higher second-quarter financials that exceeded Wall Street estimates.

It also raised its full-year financial targets. Based on the latest results, TW said it now expects its 2013 adjusted earnings per share growth to hit the mid-teens percentage range compared with the $3.24 recorded for 2012. It had previously predicted low double-digit growth.

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The entertainment conglomerate, led by CEO Jeffrey Bewkes, posted second-quarter earnings of $771 million, compared with $413 million in the year-ago period. Earnings per share rose to 81 cents from 42 cents. Revenue of $7.40 billion compared with $6.74 billion.

Wall Street had on average expected earnings of $720 million, or 76 cents per share, on revenue of $7.11 billion.

Time Warner plans to spin off its publishing arm Time Inc. by the end of the year.

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"We had a very strong quarter and first half financially and operationally, putting us on track for another great year," said Bewkes. "At Warner Bros., we had a fantastic quarter, including one of its most successful upfront seasons ever, with orders for 31 new and returning shows from the broadcast networks. And we had a strong theatrical quarter with our blockbuster reboot of the Superman franchise, Man of Steel, and The Great Gatsby."

TW's TV networks unit saw a rebound in advertising revenue to growth after a 1 percent decline in the first quarter. "Overall, TW's ratings were up 1 percent in the quarter, led by CNN and Adult Swim, up 81 percent and 19 percent, respectively," said Evercore Partners analyst Alan Gould. "TBS ratings increased 2 percent, and TNT was flat."

Film unit revenue rose 13 percent "mainly due to a stronger theatrical release slate, which included Man of Steel, The Hangover Part III and The Great Gatsby, as well as an increase in international television syndication and subscription video-on-demand revenues," Time Warner said. These gains were partially offset by a decline in U.S. TV licensing revenue due to the initial off-network availability of The Mentalist in the year-ago period.

Film adjusted operating profit grew 34 percent to $184 million due to the higher revenue, partly offset by higher film costs and increased advertising, restructuring and severance expenses.

TV networks unit revenue increased 7 percent amid a 4 percent gain in subscription revenue and 11 percent advertising growth. "The increase in advertising revenues was largely driven by growth at Turner’s domestic entertainment networks, principally due to higher pricing, strong demand for the NBA playoffs on TNT and the timing of the 2013 NCAA Division I Men’s Basketball National Championship tournament," the company said. "This increase was partially offset by the shutdown of Turner’s TNT television operations in Turkey in the second quarter of 2012."

Adjusted operating profit in the networks unit grew 13 percent to $1.3 billion as the higher revenue was partly offset by increased expenses primarily due to higher spending on sports and original programming.

"Our networks businesses, Turner and HBO, continued to shine, reflecting the success of our increased investments in distinctive programming that is resonating with audiences, advertisers and affiliates," Bewkes said. "For example, TNT and TBS finished the second quarter as the number one and number three ad-supported cable networks in primetime for adults 18-49 on the strength of original dramas like Falling Skies, Major Crimes and Dallas, comedies like The Big Bang Theory and Cougar Town and another very strong showing for the NBA playoffs."

CNN grew ratings by almost 70 percent in its key demo, "taking share from competing news networks," he added.  And HBO benefited from hits such as Game of Thrones, which finished its third season up more than 20 percent in viewership, and Behind the Candelabra, which became the most-watched HBO film in a decade. 

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai