Please ensure Javascript is enabled for purposes of website accessibility

Why Warner Music Group Stock Jumped Today

By Anders Bylund - Feb 2, 2021 at 1:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The record label and entertainment media titan posted Street-stumping results in the holiday quarter.

What happened

Shares of Warner Music Group (WMG 0.07%) were rocking on Tuesday, rising as much as 11.6% in the morning session thanks to a solid earnings report. By 12:30 p.m. EST, the entertainment company had cooled down to a 4% gain.

So what

In the first quarter of fiscal year 2021, Warner Music's revenue rose 6% year over year to $1.34 billion. Adjusted earnings fell from $0.24 to $0.19 per diluted share. The bottom-line result was in line with analyst expectations, and your average Wall Street firm would have settled for revenue near $1.25 billion.

Photo of a large crowd at a concert where one person holds up her hands to form a heart shape.

Image source: Getty Images.

Now what

Warner Music's digital sales jumped 17% higher and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 19% to $297 million. These robust sales of digital media and digital publishing licenses more than made up for much lower revenues from live performances and so-called mechanical licenses (think sales of physical recordings such as CDs). The soft GAAP and non-GAAP earnings figures resulted from various accounting quirks such as intercompany loans and Euro-to-dollar adjustments of the company's European debt papers.

The stock has now gained 21% since going public last summer. The stock is far from cheap, trading at 540 times free cash flow and 35 times forward earnings estimates, but that's understandable given the highly unusual market conditions during the COVID-19 pandemic. It's no surprise to see Warner Music's investors embrace this muscular earnings report.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Warner Music Group Corp. Stock Quote
Warner Music Group Corp.
$29.10 (0.07%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.