It has been about a month since the last earnings report for Time Warner Inc. . Shares have lost about 10% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Time Warner Q3 Earnings & Revenues Beat Estimates
Time Warner, which accepted the buyout offer of AT&T, posted third-quarter 2017 adjusted earnings of $1.82 per share that surpassed the Zacks Consensus Estimate of $1.58 but declined by a penny from the prior-year period.
Including one-time items, earnings per share from continuing operations came in at $1.73 per share, down from $1.87 reported in the prior-year quarter.
Time Warner's total revenue of $7,595 million increased 6% year over year on account of growth witnessed across Home Box Office (“HBO”), Warner Bros. and Turner. Total revenue also came ahead of the Zacks Consensus Estimate of $7,411.7 million.
Adjusted operating income came in at $2,339 million, up 13% from the year-ago quarter, whereas adjusted operating margin expanded 190 basis points to 30.8%. Management continues to project adjusted operating income growth in the high single digits for the full year.
Time Warner has taken restructuring aggressively. The company is now focusing on original programming, containing costs and increasing investments in key areas to enhance profitability. The company's investments in video content and technology continued to show results. The company witnessed robust subscription revenue growth at Home Box Office and Turner. Warner Bros. benefited from the success of It, Annabelle: Creation, Dunkirk and Wonder Woman.
Segment Details
Turner division's revenue rose 6% to $2,768 million on account of 13% increase in subscription revenue partly and 4% jump in Content and other revenue, partly offset by 3% decline in advertising revenue. Subscription revenue grew due to rise in domestic rates and growth at Turner’s international networks, partly offset by fall in domestic subscribers.
Management anticipates subscription revenue to grow at an equivalent rate as in the third quarter. Total advertising revenue is expected to increase in the low single-digits in the final quarter.
Adjusted operating income for the segment rose 5% to $1,267 million compared with the year-ago quarter.
Time Warner's HBO segment revenue increased 13% to $1,605 million driven by growth of 12% in subscription revenue and 14% in Content and other revenue. Higher subscription revenue was primarily attributed to a rise in domestic rates and subscribers, and international growth. Higher Content and other revenue reflect increased home entertainment and international licensing revenues.
Management expects Home Box Office’s subscription revenue growth rate to rise in the final quarter of 2017 relative to the quarter under review. Although programming cost is projected to increase at a higher rate, growth in revenue will be sufficed to offset the same. Consequently, the company envisions operating income growth during the fourth quarter.
Adjusted operating income for the division climbed 7% to $565 million.
Warner Bros. revenue jumped 2% to $3,460 million on account of rise in theatrical and videogames revenues, partly offset by fall in television revenues. The increase in theatrical revenue is attributable to higher home entertainment and television licensing revenues of theatrical product. Television revenue decreased due to fall in initial telecast revenues.
Adjusted operating income for the division soared 33% to $576 million. Operating income is likely to fall in the final quarter of 2017 on account of the number and mix of theatrical home entertainment releases, including the comparison to the release of Suicide Squad in the year-ago period, as well as rise in costs related to the mix of theatrical releases and television series production.
Other Financial Aspects
Time Warner ended the quarter with cash and equivalents of $2,621 million, long-term debt of $21,898 million and shareholders' equity of $27,267 million, excluding non-controlling interest of $1 million. During the quarter, the company incurred capital expenditures of $160 million and generated free cash flow of $1,326 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
VGM Scores
At this time, the stock has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Time Warner (TWX) Down 10% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Time Warner Inc. . Shares have lost about 10% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Time Warner Q3 Earnings & Revenues Beat Estimates
Time Warner, which accepted the buyout offer of AT&T, posted third-quarter 2017 adjusted earnings of $1.82 per share that surpassed the Zacks Consensus Estimate of $1.58 but declined by a penny from the prior-year period.
Including one-time items, earnings per share from continuing operations came in at $1.73 per share, down from $1.87 reported in the prior-year quarter.
Time Warner's total revenue of $7,595 million increased 6% year over year on account of growth witnessed across Home Box Office (“HBO”), Warner Bros. and Turner. Total revenue also came ahead of the Zacks Consensus Estimate of $7,411.7 million.
Adjusted operating income came in at $2,339 million, up 13% from the year-ago quarter, whereas adjusted operating margin expanded 190 basis points to 30.8%. Management continues to project adjusted operating income growth in the high single digits for the full year.
Time Warner has taken restructuring aggressively. The company is now focusing on original programming, containing costs and increasing investments in key areas to enhance profitability. The company's investments in video content and technology continued to show results. The company witnessed robust subscription revenue growth at Home Box Office and Turner. Warner Bros. benefited from the success of It, Annabelle: Creation, Dunkirk and Wonder Woman.
Segment Details
Turner division's revenue rose 6% to $2,768 million on account of 13% increase in subscription revenue partly and 4% jump in Content and other revenue, partly offset by 3% decline in advertising revenue. Subscription revenue grew due to rise in domestic rates and growth at Turner’s international networks, partly offset by fall in domestic subscribers.
Management anticipates subscription revenue to grow at an equivalent rate as in the third quarter. Total advertising revenue is expected to increase in the low single-digits in the final quarter.
Adjusted operating income for the segment rose 5% to $1,267 million compared with the year-ago quarter.
Time Warner's HBO segment revenue increased 13% to $1,605 million driven by growth of 12% in subscription revenue and 14% in Content and other revenue. Higher subscription revenue was primarily attributed to a rise in domestic rates and subscribers, and international growth. Higher Content and other revenue reflect increased home entertainment and international licensing revenues.
Management expects Home Box Office’s subscription revenue growth rate to rise in the final quarter of 2017 relative to the quarter under review. Although programming cost is projected to increase at a higher rate, growth in revenue will be sufficed to offset the same. Consequently, the company envisions operating income growth during the fourth quarter.
Adjusted operating income for the division climbed 7% to $565 million.
Warner Bros. revenue jumped 2% to $3,460 million on account of rise in theatrical and videogames revenues, partly offset by fall in television revenues. The increase in theatrical revenue is attributable to higher home entertainment and television licensing revenues of theatrical product. Television revenue decreased due to fall in initial telecast revenues.
Adjusted operating income for the division soared 33% to $576 million. Operating income is likely to fall in the final quarter of 2017 on account of the number and mix of theatrical home entertainment releases, including the comparison to the release of Suicide Squad in the year-ago period, as well as rise in costs related to the mix of theatrical releases and television series production.
Other Financial Aspects
Time Warner ended the quarter with cash and equivalents of $2,621 million, long-term debt of $21,898 million and shareholders' equity of $27,267 million, excluding non-controlling interest of $1 million. During the quarter, the company incurred capital expenditures of $160 million and generated free cash flow of $1,326 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
VGM Scores
At this time, the stock has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.