Earnings Preview: Time Warner

Time Warner (TWX) is expected to report Q3 earnings before market open Wednesday, November 5, with a conference call scheduled for 10:30 am ET.

Guidance

Analysts are looking for a profit of 27c on revenue of $11.9B. The consensus range is 25c to 29c for EPS, and revenue of $11.36B to $12.21B, according to First Call. In August, the company forecast FY08 EPS $1.07 to $1.11 vs. First Call consensus of $1.07 and free cash flow at or above $4.5B. At the same time, management also announced plans to structure AOL into three groups -- Access, Audience and Shared Services -- and expressed confidence in the ability to run separate AOL groups by 2009.

Analyst Views

Zacks Investment says that media stocks have been battered over the past year as the credit crunch impacted advertising sales. With internet display advertising facing a downturn, the firm believes AOL sales will continue to suffer in both Q4 and 2009. On October 29, Reuters reported that AOL and Yahoo (YHOO) are currently involved in "meaningful" due diligence over a possible deal, although a deal is not yet imminent. In an effort to cut costs, Time Warner's Time Inc magazine company, a company also being hit hard by a loss of advertising, is planning to restructure, a move that could lead to as many as 600 job cuts, or approximately 6% of its workforce, and affects well-known magazines such as People, Fortune and Sports Illustrated. Time Warner CEO Jeffrey Bewkes has commented that Time Inc had "lagged expectations" so far this year, and analysts and investors will listen to what effect the restructuring will have on Time Warner's current and future financial results in terms of charges or savings.