This Media Conglomerate Is Set to Outperform

Time Warner (NYSE: TWX  ) has made several wise decisions in recent years, not the least of which was CEO Jeff Bewkes' reversal of his predecessor's moves. The result is a media conglomerate pushing through its 52-week high and still trading at a reasonable valuation. While shedding less favorable assets, the company is focusing on its cash-generating, strong businesses, such as premium cable network HBO and Turner Broadcasting Station. Should investors be taking a closer look at Time Warner going forward or has the opportunity already passed?

The take
For the first quarter, Time Warner brought in $6.9 billion in revenue and $750 million in net income. The top line fell short of analysts' $7.16 billion estimate, but the bottom line posted a confident beat, with the company earning $0.82 per share vs. estimates of $0.75. Regardless of estimates, the company grew substantially over the prior year's quarter, when it earned $583 million ($0.59) in net income.

Investors seemed underwhelmed, and the stock ticked down around half a point in the moments following the announcement.

Segment by segment, television at Warner, HBO, and TBS continue to perform well. TV revenues grew 4%, while operating income was up 11%. Advertising revenue was slightly down due to the poor performance of CNN and winding down television stations in Turkey.

Time Warner's publishing unit, Time Inc., continued to lag on results, but not for long. As mentioned in a previous article, the company is set to spin off the publishing unit in the coming months, giving investors a pure play on video entertainment.

Looking forward, management expects adjusted earnings to grow in the low double digits for the full year.

Investor takeaway
Time Warner is a very well-managed company. Bewkes spun off Time Warner Cable and AOL over the past couple of years, and all three companies have prospered because of it. The upcoming publishing spinoff should relieve investors as the segment has, for years now, dragged down otherwise attractive growth and, simply put, is in a dying business.

Look to international expansion in coming years for more networks and content production. The company has reportedly made a $1 billion bid for Turkish TV Network ATV, as it finds the U.S. market to have neared saturation (not to mention the current high price of acquiring domestic businesses).

Time Warner isn't a bargain by any means, but it is a well-run company set for continued growth.

More from The Motley Fool 

The tumultuous performance of Netflix shares since the summer of 2011 has caused headaches for many devoted shareholders. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why The Motley Fool has released a premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company as well as reasons to buy or sell the stock. The report includes a full year of updates to cover critical new developments, so make sure to click here and claim a copy today.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2415573, ~/Articles/ArticleHandler.aspx, 10/1/2014 10:45:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement