TWX Time Warner Inc. New

   (FROM THE WALL STREET JOURNAL 2/11/16) 
   By Keach Hagey and Lisa Beilfuss 

Time Warner Inc. offered an upbeat forecast for the year after delivering fourth quarter earnings that topped expectations largely thanks to lower tax expense.

But operationally, the picture was more mixed, as adjusted operating income dropped at each of its three divisions: Turner Broadcasting, HBO and Warner Bros.

Like other media companies that have reported earnings so far this season, Time Warner generally beat analysts' expectations for its advertising performance, but came up short in subscription revenue for its cable networks that include TBS, CNN and HBO. That slowdown stoked investors' concerns about the long-term strength of the affiliate fee revenue from TV networks.

Time Warner shares fell 5% to $60.07 in 4 p.m. trading on Wednesday, their lowest point in more than two years.

However, Time Warner was able to forecast a significant uptick in affiliate fee revenue growth at Turner and subscriber growth at HBO.

Signs of weakness in its pay-TV bundle did take a toll on Time Warner's earnings for the December quarter. Subscription growth at Turner was just 1%, below analysts' expectations, because of the impact of foreign currency fluctuations at its international channels. Domestically, higher pricing was partially offset by lower subscriber numbers at its channels.

But Turner predicted that subscriber revenue would accelerate to "low teens" percentage growth starting in the first quarter of this year, now that it has achieved the rate increases it was targeting at all of its biggest distributors, the company said.

HBO also saw some signs of weaker-than-expected growth, with subscriber revenue rising 3% in the fourth quarter. That fell short of 4% growth analysts expected.

HBO Now, its broadband-only offering, contributed meaningfully to subscriber growth, though not quite at the level that some analysts had been estimating. HBO Now signed up 800,000 subscribers over the past year, the company disclosed on the call. The company said it plans to more aggressively market its HBO Now product.

Time Warner Chief Financial Officer Howard Averill predicted that over the next couple of years HBO subscription revenue growth would be by a percentage in the "high-single-digits."

Strength in HBO helped offset weakness in Time Warner's film segment. HBO revenue rose 5.5% to $1.41 billion, while Warner Bros. revenue tumbled a worse-than-expected 15% amid a dearth of blockbusters.

Overall revenue declined 5.9% from a year earlier to $7.08 billion.

In all for the quarter, Time Warner reported profit of $857 million, or $1.06 a share, up from $718 million, or 84 cents, a year earlier.

Analysts generally attributed the higher-than-expected earnings to a low tax rate. Its income-tax provision was $280 million last quarter, versus $381 million a year earlier on operating profit that was roughly flat.

(END) Dow Jones Newswires

February 11, 2016 02:47 ET (07:47 GMT)

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