Time Warner Outpaces Estimates on Increased Video Sales

May. 5.10 | About: Time Warner (TWX)

Time Warner Inc. (NYSE:TWX) has posted better-than-expected first-quarter 2010 results that topped the Zacks expectation on the heels of an improved advertising environment and increased home video sales.

The company notified that it witnessed the highest revenue increase in nearly two years and recorded the biggest-ever quarterly adjusted operating profit in its history, sending the stock up 58 cents or 1.8% to $33.25 in before-market trading.

All these factors drove the quarterly earnings of 61 cents a share, which surpassed the Zacks Consensus Estimate of 48 cents and rose 61% from 38 cents delivered in the prior-year quarter. On a reported basis, including one-time items, quarterly earnings came in at 62 cents a share up 13% from 55 cents posted in the year-earlier quarter.

The diversified media conglomerate now expects fiscal year 2010 earnings to rise at least in the mid-teens on a percentage basis.

Time Warner’s first-quarter total revenue climbed 5% year-on-year to $6,322 million, driven by growth across Networks and Filmed Entertainment segments, partially offset by a decline in the Publishing segment. Adjusted operating income soared 37% to $1,415 million.

Revenue at Networks division, which comprises Turner Broadcasting and HBO, climbed 9% to $2,958 million, driven by a 7% growth in subscription revenue, 9% increase in advertising revenue, and 22% jump in Content revenue. Adjusted operating income at the division surged 22% to $1,142 million.

Filmed Entertainment division revenue grew by 2% to $2,694 million, driven by strong theatrical home video releases, partially offset by lower television licensing fees. The division, which comprises Warner Brothers, posted adjusted operating income growth of 43% to $307 million.

Publishing revenue dropped marginally by 1% to $799 million, reflecting a 5% increase in advertising revenue and 2% jump in subscription revenue, but more than offset by a 26% drop in other revenue. The division swung to an operating profit of $50 million after delivering an operating loss of $32 million in the prior-year quarter.

Time Warner ended the quarter with cash and cash equivalents of $5,167 million, long-term debt of $16,387 million and shareholders’ equity of $33,315 million. The company generated free cash flow of $1,275 million during the quarter. The company also notified the repurchase of 22 million shares for about $666 million in the first four months of fiscal 2010 under its $3 billion share repurchase authorization.