Earnings Preview: Time Warner

Time Warner (TWX) is expected to report Q2 earnings before market open Wednesday, Aug. 6, with a conference call scheduled for 9:00 am ET.

Guidance

Analysts are looking for a profit of 23c on revenue of $11.45B. The consensus range is 21c to 26c for EPS, and revenue of $11.18B to $11.84B, according to First Call. In April, Time Warner forecast FY08 EPS $1.07 to $1.11, in-line with First Call consensus expectations of $1.08.

Analyst Views

After months of looking at its options for the parts of AOL, Time Warner (TWX) is reportedly ready to separate its dial-up access business from the ad and content side, and will next decide if it will sell all or parts of AOL, according to the Wall Street Journal. Despite uncertainty about AOL's future, the company is getting into the lifestreaming business, having recently launched AIM BuddyUpdates; also, according to TechCrunch, AOL has acquired Socialthing. A senior level source at AOL said that rumors of another round of layoffs at AOL in August are "flat-out wrong." The source said the company is continuing to cut expenses and closing or selling non-strategic divisions.

Citigroup said that while they are lowering 2009 expectations for U.S. ad growth to $287B, down 0.2% from 2008 expectations, Time Warner remains a top pick. The firm sees only one positive near term catalyst among large cap media -- the sale of Time Warner's AOL unit. With an AOL sale, the firm thinks Time Warner could reach $19 a share, offering investors 32% upside from current levels. Microsoft (MSFT) has been rumored to have interest in AOL, and so has Earthlink (ELNK).

In other news, Time Warner's (TWX) Chairman, Richard Parsons, said he will most likely retire in the next year, which could leave the post open for CEO, Jeffrey Bewkes. In an effort to boost its profit, the company will likely make fewer films.