Stocks of Time Warner surge after reporting quarterly revenues that beat expectations. The higher-than-expected second-quarter profit was largely driven by the box-office success of the superhero movie “Wonder Woman.”
Shares were up 0.3 percent at $102.67 Wednesday on early New York Stock Exchange trading.
Second-quarter earnings climbed to $1.1 billion, or $1.34 a share, compared to $1.0 billion, or $1.20 per share in the same period last year. The company reported adjusted earnings per share of $1.33 against analysts’ consensus of $1.19. Revenue for the quarter also surged to $7.33 billion compared to $6.95 million in the same period last year, and is also above FactSet consensus of $7.30 billion.
Revenue from the entertainment conglomerate’s Warner Bros. studio, which includes the movie business, increased 12.4 percent to $2.99 billion, exceeding analysts’ estimate of $2.90 billion. The increase in the film unit revenue is attributed to higher theatrical and video games revenue, partially offset by lower revenues for television.
The movie “Wonder Woman,” which starred Israeli actress Gal Gadot for the lead role, earned about $800 million worldwide. “The increase in theatrical revenues was mainly due to the box office release of ‘Wonder Woman’ and higher home entertainment revenues primarily related to the release of ‘The Lego Batman Movie’ and carryover from ‘Fantastic Beasts and Where to Find Them,’” the company said in an earnings statement.
Likewise, revenue from premium cable channel HBO, which airs the fantasy series “Game of Thrones,” also inched slightly to $1.48 billion, as an increase in subscription revenues was offset by a decline in sales of home entertainment and international licensing. Analysts, however, were expecting revenue of $1.51 billion, CNBC reports. But the newest “Game of Thrones” season had started airing last month, and is already gaining traction.
“We’re very pleased with our first-half results, which keep us on track to achieve our objectives for the year,” Time Warner CEO Jeffrey Bewkes, said in a statement. “Our performance is a result of the continued successful execution of our strategic objectives—with the strong subscription revenue growth at Home Box Office and Turner a great example of this—along with the investments we’re making in our brands and high-quality video content.”
Revenue in Time Warner’s Turner division, which includes CNN and TNT, climbed 3.1 percent to $3.1 billion in the quarter. Subscription revenue was partially offset by a 6 percent decline in advertising revenue.
Time Warner said that the decline is due in part to airing fewer NBA and high-profile collegiate basketball games than last year.
According to Bloomberg, the company is charging pay-TV providers higher fees for the cable channels to counter the rising costs for sports programming and the decreasing number of cable network subscribers.
The company said that it expects to see continuing declines in advertising revenue this quarter due to the growing popularity of online TV and film platforms. This is starting to worry some analysts.
“Apparently, the news cycle strength at CNN is not enough to offset ratings pressures at Turner’s domestic entertainment networks,” FBR Capital Markets analyst Barton Crockett wrote in a note to clients.
Like other traditional media companies, Time Warner is also struggling to maintain its viewers as they gradually shift towards online streaming platforms like Netflix and Prime Video. This trend is also negatively affecting ad sales.
Time Warner is in the process of being acquired by AT&T. For AT&T, Time Warner’s quarterly results show that it is currently in a competitive position and that it’s business is doing well going into the merger. According to Time Warner, it is expecting the deal, which costs about $85 billion, to close before yearend.
The company’s shares jumped 3.1 percent over the last three months, compared to a 3.6 percent increase in the S&P 500 index.