Time Warner (NYSE:TWX) owes a little of its earnings magic to Harry Potter, given that the newest movie in the series, Harry Potter and the Prisoner of Azkaban, was one shining spot in the company's latest quarter as it beat analysts' estimates. However, despite the good news, which included an upbeat dose of forward guidance, investors bid shares of the media giant downward in today's trading.

Time Warner, a Motley Fool Stock Advisor pick, reported second-quarter earnings down 27% at $777 million, or $0.17 per share, with a tough comparison with 2003 because of a legal settlement with Microsoft (NASDAQ:MSFT) this time last year. Revenues, however, increased 10%, with particular strength in its films and cable.

Revenues were up across the board in all its business segments as the economy improves and consumers respond favorably to its offerings. Although it will face some tough comparisons, especially concerning movie releases from last year, the company said it expects a strong second half of 2004.

For those who wait anxiously to see how the America Online unit is doing, its fortunes improved with a 23% increase in advertising revenues, reflecting industrywide gains in Internet advertising. However, subscription revenue was flat, with U.S. subs continuing their declines; 668,000 users defected in the quarter, paring AOL's subscribership to 23.4 million. (AOL's initiatives -- such as harnessing the free Internet -- as it tries to stop subscriber defections to broadband have been interesting to watch.)

However, as longtime Fool Rick Munarriz commented earlier this week, while AOL gets serious attention, there's a lot more to it than just the beleaguered ISP. In filmed entertainment, for example, the company benefited not only from the release of the newest Harry Potter series but also from DVD releases of some other big-name flicks, such as Matrix Revolutions and The Lord of the Rings: Return of the King.

The company's also the name behind HBO, TNT, and TBS, to name a few; despite my own previous doubts, in its conference call (transcript courtesy of Thompson StreetEvents), Time Warner management said HBO's Sex and the City is already a hit in its sanitized form on TBS. Magazines in Time Warner's publishing segment include Time, Fortune, and Sports Illustrated, and it published 16 books that landed on the New York Times Bestseller list. When it comes to media, Time Warner does own some of the best-known names in the business.

Indeed, maybe the company does take too much flack for the widely scrutinized union with AOL. Maybe Time Warner is beaten down and undervalued, as was the contention in a Foolish piece this week. Despite AOL's travails, with a trailing P/E of 23, it may not be a high price to pay for a company that participates in both traditional media and pop-culture hits as well as areas that indicate future growth, such as cable Internet and VoIP.

How did you feel about Time Warner's results? Fools are talking about the stock on the Time Warner discussion board. Or, if you're curious as to what other companies the Gardner brothers have marked for success, check out Motley Fool Stock Advisor.

Alyce Lomax does not own shares of any of the companies mentioned, but having enjoyed Prisoner of Azkaban, she's looking forward to the next Harry Potter movie, which executives said is scheduled for release in 2005.