What To Watch For In Time Warner’s Q3 Earnings

Time Warner (NASDAQ: TWX) is scheduled to announce its fiscal third quarter results on Wednesday, October 26. The company reported better-than-expected second quarter results, as both its earnings and revenue beat consensus estimates. The company’s revenue increased 5% year-over-year (y-o-y) to $7.3 billion, primarily driven by growth across divisions, particularly HBO, as well as the cable TV and film businesses. In addition, Time Warner’s adjusted operating income came in flat at $1.8 billion, and it also posted adjusted earnings of $1.33 per share, which was a 3% 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. Also, we expect Time Warner’s top line to benefit from CNN, which posted a solid ratings uptick during the third quarter.

CNN Saw Best Q3 Ratings Since 2001 

CNN saw solid ratings growth in September, as it witnessed its most-watched third quarter ever among both adults 25-54 and total viewers in 16 years. For the quarter ending September, the network grew 17% y-0-y in total prime time viewers and 22% y-o-y in the 25-54 demographic. This could help boost the company’s advertising income in the third quarter.

Relatively Weak Studio Performance In Q3

Warner Bros. collected $708 million at the U.S. box office during the September quarter, primarily led by the success of It, Dunkirk, and Annabelle: Creation. It grossed nearly $320 million at the domestic box office against a production budget of $35 million. However, the studio’s performance was still relatively weak in Q3 2017 compared to the prior year quarter, as the company expects to see difficult comparisons from the release of Suicide Squad in Q3 2016. This could negatively impact its year-on-year comps.

Future Outlook

In the upcoming quarter, the company expects Turner’s total advertising revenues to decline in the low single-digits compared to the prior year quarter, primarily due to lower audience delivery at its domestic entertainment networks.  Reuters’ compiled analyst estimates forecast revenues of $7.4 billion and earnings of $1.59 per share for Q3 2017, implying growth of about 3% and (-13%), respectively. For the full year, the company continues to expect its operating income to grow in the high single-digits.

Have more questions on Time Warner? Please refer to our complete analysis for Time Warner

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology