Time Warner’s Q4 Earnings Preview: What To Expect?
Time Warner Inc (NASDAQ: TWX) is scheduled to announce its fourth quarter fiscal 2016 results on Wednesday, February 8. The company started the year on a strong note, with its earnings per share beating analyst estimates for three straight quarters of the year. In Q3, the company’s revenue increased 9% year-over-year (y-o-y) to $7.2 billion, driven by growth in all divisions, particularly the company’s cable TV and film business. It also posted earnings of $1.83 per share, which was a 46% y-o-y increase.
In the near term, Time Warner’s results will likely be primarily driven by two factors — HBO and Warner Bros.’ movies and TV licensing. HBO’s original content could continue to aid its subscription growth in the coming years while the HBO Now streaming service widens its subscriber reach. In Q4, we expect Time Warner’s top line to benefit from CNN, which posted a solid ratings uptick during the fourth quarter. In addition, Warner Bros. also benefited from the success of films such as Fantastic Beasts and Where To Find Them, among others in the fourth quarter. The company’s stock price, on the other hand, will be largely driven by whether or not its acquisition by AT&T is approved. However, the odds of the mega-merger going through appear to be more favorable, amid positive signals from the President Trump’s administration and the possibility that the deal may be able to avoid FCC oversight.
CNN Gains From Presidential Election Coverage
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CNN saw solid ratings growth in November, as it was rated No. 5 among basic cable networks in prime-time and total-day total viewers. CNN’s Election Night coverage was the most watched prime-time night in its history. CNN viewership increased 128% y-o-y during the Presidential election week. ((Donald Trump Election Brings November Ratings Boon, Deadline, November 2016)) Overall CNN enjoyed 77% y-o-y growth in its total viewers in 2016, fueled by the election. In addition, CNN saw a massive 90% y-o-y increase in the 18-49 age group, logging 373,000 prime-time viewers for the entire year. ((Cable TV Rankings 2016: Presidential Politics Fuels Ratings Gains, Deadline, Dec 20 2016)) The benefit of this increase in viewership could boost the company’s advertising income in the fourth quarter.
Warner Bros. Benefits From Success of Fantastic Beasts
Warner Bros. collected $409 million at the U.S. box office during the December quarter, primarily led by the success of Fantastic Beasts and Where To Find Them and continued success of The Accountant. Fantastic Beasts and Where To Find Them has so far grossed close to $809 million at the global box office, against a production budget of $180 million. [1] The studio’s performance was better in Q4 2016 as compared to the prior year quarter, which should boost earnings.
Future Outlook
Reuters’ compiled analyst estimates forecast revenues of $7.72 billion and earnings of $1.19 per share for Q4 2016, implying growth of about 9% and 12%, respectively. For full year 2016, the company extended its forecast for earnings per diluted share to range between $5.73 to $5.83 from $5.35 to $5.45.
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Notes:- Fantastic Beasts and Where To Find Them, Box Office Mojo [↩]