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Time Warner highlights HBO growth, 'Gravity' boosts results

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[February 06, 2014]  By Liana B. Baker

(Reuters)  Time Warner Inc reported better-than-expected quarterly profit and revenue on Wednesday, helped by the success of the space thriller "Gravity" released by its movie studio, and shed light on the performance of its cable units.

The media company, which is focusing more on television as it gets closer to spinning off its publishing unit, broke out results for its premium movie network HBO for the first time.

This should give investors a better look at the money-making division, which is often compared to Netflix, one of the highest-flying stocks of last year.

HBO's revenue increased 4 percent to $4.9 billion, while adjusted operated income rose 8 percent to $1.7 billion. Time Warner Chief Executive Jeff Bewkes said in a statement that HBO recorded its biggest gain in domestic subscribers in 17 years.

"Perhaps the Street should put a higher multiple on the HBO business. It's the largest potential competitor to Netflix, which is trading at such a high multiple," said Gabelli & Co analyst Brett Harriss, adding HBO's performance last year was in line with his estimates.

Time Warner's net income fell to $983 million, or $1.06 per share, in the fourth quarter ended December 31, from $1.11 billion, or $1.15 per share a year earlier. Excluding items, the company earned $1.17 per share.

 


Revenue rose to $8.56 billion from $8.16 billion. Analysts had expected earnings of $1.15 per share on revenue of $8.39 billion.

Time Warner forecast 2014 adjusted earnings per share to increase by a percentage in the low double digits from last year's figure of $3.51 per share, excluding Time Inc.

Analysts on average were expecting earnings of $4.25 per share, according to Thomson Reuters I/B/E/S. However, that forecast did not fully take into account the Time Inc spinoff.

SPINOFF

Turner, the other cable unit of Time Warner which runs networks such as CNN and TBS, saw its revenue rise 5 percent to $10 billion in the quarter, as advertising revenue also rose 5 percent.

This beat Viacom Inc's results last week, which included a 3 percent rise in domestic advertising revenue.

Bernstein Research analyst Todd Juenger said in a research note that investors will be waiting for an update on advertising demand when executives hold a conference call later on Wednesday.

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"Ratings matter a lot ... Time Warner had the most problematic fourth-quarter ratings among any of our coverage companies," Juenger said.

Revenue at its Warner Bros unit which includes it movie studio rose 7 percent to $4 billion in the fourth quarter.

Its performance was helped by movies "Gravity", starring Sandra Bullock and George Clooney, and "The Hobbit: The Desolation of Smaug", the second of a three-part adaption of J.R.R. Tolkien's 1937 novel.

The company said it was on track to make Time Inc, the company created from the spinoff of its publishing assets, a separate publicly traded company in the second quarter.

Revenue at Time Inc, the publisher of Time magazine, People and Fortune, was flat at $966 million as subscription revenue fell 6 percent.

Time Warner authorized a share repurchase program of $5 billion, compared to $4 billion a year ago and upped its dividend by 10 percent.

The company's shares closed flat at $62.40 on the New York Stock Exchange on Tuesday and were indicating a flat open on Wednesday morning.

The stock has risen 13 percent since the company announced the Time Inc spinoff last March.

(Reporting by Liana B. Baker, additional reporting by Sruthi Ramakrishnan in Bangalore; editing by Maju Samuel and Sophie Hares)

[ 2014 Thomson Reuters. All rights reserved.]

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