Time Warner Net Falls 18%, Adjusted EPS Beats; TWC Net +16%, Beats

Time Warner's Q1 net income fell 18% to $1.2 billion, or $0.31/share, but adjusted EPS of $0.22 topped the Street's estimate of $0.20. Sales rose 9% to $11.2b, in-line with expectations. Time Warner Cable reported earnings for the first time as a public company. Q1 net income increased 16.5% to $276m, or $0.28/share, beating the Street ($0.25), but a 61% rise in revenues to $3.85b, missed analysts' average estimate of $3.92b. An S&P analyst pointed to difficult comparisons in Time Warner's film segment, but noted, "The highlights of the quarter were the cable unit and AOL, which seems to be on track with the new strategy." AOL's profit rose 27% to $542m, on a 40% increase in advertising revenue, despite a 25% decline in sales due to its decision to offer certain services free of charge. Shares of Time Warner lost 0.2% to $20.59 in normal trading, while Time Warner Cable lost 1.6% to $36.22. In pre-market activity, Time Warner last traded at $20.95 (+1.75%) on thin volume just over 5,000 shares, and Time Warner Cable was up 0.8% to $36.50 on volume of only 600.

Sources: Earnings press release (i, ii) [pdf], Business Outlook press release (i, i) [pdf], Bloomberg (i, ii), MarketWatch (i, ii), Reuters
Commentary: Time Warner Mulls Its Options With Future of Cable Stake- WSJ • The Irony! Time Warner Considers Selling Cable To Focus On Internet • Time Warner Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Time Warner (TWX), Time Warner Cable (TWC). Competitors: News Corp. (NWS), Viacom, Inc. (VIA), Comcast Corporation (CMCSA), DIRECTV Group, Inc. (DTV), Cablevision Systems Corporation (CVC), EchoStar Communications (DISH). ETFs: PowerShares Dynamic Media Portfolio ETF (PBS), PowerShares Dynamic Leisure & Entertainment (PEJ)

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