Time Warner(NYSE:TWX.DL) has finally spun-off its publishing division, Time(NYSE:TIME), into a separate company. The publisher, just like other newspapers and magazines, has been facing numerous secular headwinds as consumers are turning to digital media, and it has been a drag on Time Warner's earnings. Following the spin-off, Time Warner should see a better valuation as it becomes a focused content company.

Pure-play media outlet
Time Warner posted strong top-line numbers during the last quarter at $6.8 billion, a 10% year-over-year increase. Time has been facing challenges due to consumers opting for Internet based news and content, and this separation of Time will lead to higher valuation multiples in the equity markets for Time Warner.

Time Warner's free cash flow grew 79% year-over-year to $1.7 billion, and the company is aggressively buying back shares. Time Warner bought back 20 million shares for $1.3 billion as of April 2014. Time Warner also saw its operating margins rise to 25.6% in the last quarter, which was a big year-over-year improvement from Q1 2013 when its EBIT margin was only 20.3%. As a result, Time Warner's EPS grew 80% year-over-year to $1.42 in Q1 2014.

Turner and HBO are major drivers
Turner Broadcasting's revenues increased 5% year-over-year to $2.6 billion in the last quarter. Turner continues to be the leading ad-supported cable network during prime-time for adults and is also the biggest contributor to its operating income. In the last quarter, Turner's operating income of $900 million made up roughly 47% of Time Warner's total EBIT.

Based on the strong performance of the NCAA tournament, TBS maintained its top position on ad-supported cable among the 18-49 age demographic. CNN gained strong momentum with almost 4 billion page views and 275 million video starts in March, both of which are record numbers for CNN. On the other hand, TNT lost some ground among younger viewers, but it was among the top five cable networks last year. The company decided to ramp up its investment in programming on TNT and that should lead to improvements down the road.

HBO's revenues grew 9% year-over-year to $1.34 billion. HBO's operating income of $464 million in the last quarter represented roughly 23% of Time Warner's total operating income. In the future, HBO's revenues should get a boost due to its high-quality original programming. The company's Game of Thrones series surpassed The Sopranos as the most watched show in HBO's history, and the season four finale of Game of Thrones was the most pirated show ever.

In addition, HBO struck a deal with Amazon.com(NASDAQ:AMZN) to deliver a select catalog of original HBO programming to Amazon Prime. This high-quality HBO content will get more exposure by being available on Amazon's Prime platform, which has more than 20 million subscribers. Time Warner's chief executive officer stated that the deal with Amazon has the potential to drive more subscriber growth for HBO's premium network. HBO will be using the revenues from the Amazon deal to invest more in the company's original content and further develop HBO Go.

Larger MVPDs (multi-channel video programmers) like Comcast(NASDAQ:CMCSA) are offering HBO at a lower price bundled with Internet. Comcast, which is the largest cable company in the U.S., will be able to market HBO and broadband plans as a package to consumers who only subscribe to Internet from Comcast.

Warner Bros. has a strong slate
The Warner Bros. studio has a very promising line-up of TV shows and movies in 2014 after finishing off 2013 with strong box-office numbers. Warner Bros. saw its revenues grow 14% year-over-year to $3.1 billion in the last quarter and its operating income stood at $369 million. Warner took home more Academy Awards than all other leading studios combined, led by Gravity which grossed $700 million at the box office.

In Q1 2014, The LEGO Movie already grossed more than $465 million worldwide and the studio is already planning on another LEGO Movie to be unveiled in 2017. In addition, Warner Bros. will be releasing The Hobbit: The Battle of the Five Armies and Horrible Bosses 2 in the holiday quarter of 2014. Warner Bros. recently acquired the non-US businesses of Eyeworks Group, which is a major producer and distributor of independent content across various genres in more than 150 countries.

Going Forward
Time Warner produces very high-quality content across all its media and entertainment assets. The company's top and bottom lines are delivering great numbers and the company is committed to returning significant capital returns to shareholders as well. The company recently hiked its cash dividend and has $3.8 billion left in its share repurchase program. On an absolute return basis, Time Warner's shareholders should make solid returns in the long term.