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HBO Now works across devices. Source: Time Warner

Time Warner (NYSE:TWX) shares tumbled on Wednesday, shedding 5% after the owner of HBO, CNN, and Warner Bros. turned in its fourth quarter earnings report. Time Warner earned an adjusted $1.06 per share on revenue of $7.1 billion. Analysts had expected the company to earn an adjusted $1.00 on revenue of $7.53 billion. Despite the revenue miss, shares recovered Thursday, up about 3% as of this writing.

While Turner networks and Home Box Office posted modest growth, performance at the Warner Bros. segment weighed on sales. Let's take a closer look at the report.

Turner hit by rising programming costs
Time Warner's second largest segment by revenue, Turner, is composed of its traditional cable networks, most notably CNN, TNT, TBS, and Cartoon Network. In the fourth quarter, revenue rose modestly, but operating income declined. Turner generated an adjusted $781 million of operating income (down 15% on an annual basis) on revenue of $2.7 billion (up 2% from the same period last year).

Turner's business depends on both advertising and subscribers to the traditional cable bundle. Last quarter, its disappointing subscriber outlook fueled fears of cord-cutting. Fortunately, Turner's subscriber count remained roughly flat this quarter, while advertising revenue increased. The strength of the U.S. dollar, however, limited growth and higher programming costs (up 22% on an annual basis) more than offset better sales.

HBO adds 2.7 million domestic subscribers
Time Warner's HBO business is its smallest segment by revenue. Composed of Time Warner's two premium cable networks, HBO and Cinemax, the segment depends largely on subscription revenue.

HBO added a total of 2.7 million domestic subscribers in 2015, bringing the total to 48.7 million (up nearly 6% on an annual basis). That includes the impact from HBO Now, Time Warner's new digital offering that launched in the first half of 2015. Total HBO revenue rose 6% on an annual basis to $1.4 billion, while its adjusted operating income of $393 million was roughly unchanged from last year. Higher programming costs weighed on earnings, as did higher marketing and technology costs related to the rollout of HBO Now.

A difficult comparison for Warner Bros.
Time Warner's largest segment, Warner Bros., which includes its television, film studios, and video game business, had a difficult quarter with performance declining notably from last year.

Warner Bros. generated an adjusted operating income of $373 million on revenue of $3.3 billion. Those figures were down 5% and 13%, respectively, from the same quarter last year. In the fourth quarter of 2014, Time Warner benefited from a number of major film releases, including The Hobbit: The Battle of Five Armies, Interstellar, and Annabelle. Its fourth quarter film slate was notably weaker in 2015, weighing on performance.

A bigger dividend and better outlook
Although the fourth quarter results proved somewhat disappointing, management reiterated its commitment to returning capital to shareholders. The company raised its quarterly dividend 15% to $0.4025, giving it an annual yield of around 2.6% at current prices. At the same time, Time Warner announced a new $5 billion share repurchase program.

Time Warner's adjusted earnings per share outlook of $5.30 to $5.40 in 2016 exceeded analyst expectations of $5.26 per share.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Time Warner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.