Time Warner (TWX) posted 3Q earnings of $1.22 a share (beating $0.94 consensus) and revenue of $6.24bn marginally beat expectations. Revenue was up 3% y/y as subscription revenues grew 10%. Revenues at HBO were up 10% y/y, up 3% at Warner Bros., and 4.6% at Turner.
The big news is that TWX announced a standalone HBO product that'll be rolled out domestically next year. Its standalone HBO offering is just one way TWX is tapping into non-traditional platforms. Innovation is a much needed attribute in the media business. It appears to be embracing streaming more, which is a big positive.
TWX managed to return $5.7bn (over 8.5% of its market cap) to shareholders YTD via dividends and buybacks. Shares are up 6% for the last month.
We covered TWX last year, noting,
There's some analysts that put the breakup value of Time Warner as high as $93 a share, while others believe Time Warner could attract between $90 to $100 a share in a buyout [...] Either alone, or as a buyout candidate, shares of Time Warner look attractive.
We still feel there's plenty of upside left in TWX. The company expects to generate $6 in EPS by 2016 -- 50% growth from 2014 consensus -- and $8 in 2018, which is double expected earnings for this year.
The valuation -- compared to other media giants -- is still compelling at 16.5x earnings. HBO remains the key asset and TWX is pushing ahead with competing with Netflix. We still like TWX as the best bet in media.