Time Warner (TWX) posted fourth-quarter earnings results on Wednesday, Feb. 10, that showed declining revenue but surprisingly robust profits.

Here's a look at how the media giant's headline results stacked up against the prior-year period.


Q4 2015 Actuals

Q4 2014 Actuals

Year-Over-Year Growth


$7.1 billion

$7.5 billion


Net Income

$857 million

$718 million






Data source: Time Warner financial filings.

What happened this quarter?
The cable broadcasting unit, Time Warner's biggest segment by far, generated sharply lower profits, and the drop wasn't offset by growth elsewhere in the business. Meanwhile, falling revenue at the Warner Bros. division accounts for the company's overall sales decline. Both the top- and bottom-line figures were negatively affected by foreign exchange rate swings, it said.

Here are the key highlights of the quarter:

  • Turner revenue ticked higher by 2% as advertising sales improved, but cable subscriber numbers fell. Operating income dove 15% due to a 22% spike in programming costs on flat sales growth.
  • Warner Bros. sales declined 13% on lower theatrical film revenue, which was partially offset by strong video game sales. Operating income fell 5% in Time Warner's second biggest business division.
  • Home Box Office revenue rose 6% mainly thanks to higher prices but also due to a slight uptick in subscribers.
  • Overall adjusted net income declined by 12%, and profitability slipped to 20% of sales from 21% a year ago.

What management had to say
Despite the fourth-quarter revenue and profitability declines, CEO Jeff Bewkes chose to focus on Time Warner's strong full-year results. "All three of our operating divisions increased revenue and profits," in 2015, he said, "while also investing to capitalize on the shift to on-demand viewing and growing worldwide demand for the very best video content."

Bewkes called out Warner Bros.' "best year ever in video games," Turner's "tremendous value to its audiences," and HBO's subscriber growth, powered by its collection of the "biggest Hollywood hits and best original programming." That operating strength gave management the confidence to boost the dividend payout by 15%, "further demonstrating our commitment to shareholder returns," Bewkes said.

Looking forward
Time Warner now expects to generate $5.35 per share in adjusted profit this year, up substantially from the $4.62 it logged in 2015. That forecast was also solidly higher than the $5.26 per share that analysts had been targeting. However, investors apparently focused on the negative profitability trend within the broader TV business and the stock fell 5% after the results were announced.

But the year ahead will be a busy one for Time Warner's broadcasting division, particularly around sports and news. Turner will air the NCAA Men's Basketball finals for the first time this spring, and CNN aims to own political coverage around the presidential election. Combine that with what's expected to be a banner year for Warner Bros films, anchored by Batman v. Superman: Dawn of Justice out next month, and it's no surprise that management is optimistic about posting improving results this year.