Time Warner Does Not Dazzle

Time Warner Inc. (NYSE: TWX) reported second-quarter adjusted earnings per share (EPS) of $0.59 and $6.7 billion in revenue before markets opened this morning. EPS was just slightly lower than the $0.60 the company reported a year ago, while revenue was down from $7.04 billion, a drop of nearly 5%. The results compare to the Thomson Reuters consensus estimates for EPS of $0.58 and $6.94 billion in revenue.

The movie and television entertainment company did not offer any additional guidance. The current consensus estimate for the third quarter calls for EPS of $0.90 on revenue of $7.08 billion. For the full fiscal year, the consensus estimate calls for EPS of $3.21 on revenue of $29.37 million. The revenue numbers are very likely to be adjusted following today’s revenue miss.

The company’s chairman and CEO had this to say:

[O]ur results highlight the strength and potential of our networks and television production businesses, which generate the bulk of our revenues and earnings. … During the recent upfront buying season, Warner Bros. secured orders from the broadcast networks for 16 returning series and 9 new shows, making it the top producer of network TV primetime programming once again.

Time Warner noted that revenue from its Turner and HBO networks rose 4% to $3.6 billion in the second quarter, more than half the company’s total. Revenue fell by 8% in the Warner Bros. segment, which the company attributed to “difficult comparisons” to the second quarter of 2011. In its publishing business, the company noted a revenue decline of 9%, following substantial drops in both advertising and subscription revenue.

The company’s EPS estimate fell from $0.67 three months ago to $0.59 today. The company’s ability to hurdle the much lower bar, at the same time that it posted a significant revenue miss, could be troubling to investors.

Shares closed up 1.4% yesterday at $39.12 but are down slightly in premarket trading. The current 52-week range is $27.62 to $39.49. Thomson Reuters had a consensus analyst price target of $42.80 before today’s results were announced.

Paul Ausick