PC Upgrades on Byte-Size Budgets -- Savings Experiment
Stay-At-Home Mom Fights New Credit Card RuleTime Warner Inc. (NYSE:TWX) has earnings set for Wednesday, January 31, 2007. Expectations are that it will earn 23 cents per share and post $12.48 billion in revenues, although Starmine's SmartEstimate (subscription required) is for EPS of only $0.22. The company posted 20 cents a share in earnings last quarter and adjusted revenues were $10.54 billion.
Here's a look at how things should shake out for TWX's major divisions:
CABLE COMPARISONS: What is different this time around is that the Adelphia cable subscribers are all now part of the Time Warner Cable unit and the swap with Comcast has occurred. We actually have the Time Warner Cable stock trading under the ticker TWCAV on Pink Sheets.
Once the real stock starts trading, it will appear under the ticker TWC on NYSE. Going forward, this dual stock structure has a shot at making financials look murky for another quarter or two. Time Warner Cable had roughly 11 million basic subscribers as of last March, but in the most recent notes after completing the Comcast swap, it says it has 13.5 million subscribers in 33 states (85% in 5 states).
AOL UNIT: The AOL unit has been growing, but it didn't gather extra market share in search in the December month, according to comScore data anyway. While some stink was raised about the troubled AOL bid for TradeDoubler, this was really TradeDoubler's doing. Its larger shareholders rebuffed the offer and AOL was negotiating with the board of directors. It was only a $900 million deal, so it isn't exactly like the keys to the future dynasty were left at home.
One area of note: AOL is switching all of its online music platform to Napster, and this is partly opening it up to larger revenue sharing while trimming operating costs (or it should be) for AOL music. Also, AOL completed its sales of Internet access operations for AOL Europe while maintaining the portal side of the business. Now it has all that cash in the bank.
MOVIE & FILM SEGMENT: Warner Brothers got a bump out of "The Departed" and "Happy Feet," since both did better at the box office than expected. Warner Brothers has also set itself up to win from the DVD format wars with its "Total HD Disc" that will play both HD-DVD and Blue-ray formats. Imagine a free billion dollars here and there because of a modern day VHS-Betamax style war all over again. If the kids are going to fight no matter what, some of the neighbors might as well sell tickets to watch.
ANALYSTS: The analysts have disappointingly only been playing catch-up on the TWX rise, but Merrill Lynch's Jessica Reif Cohen (StarMine's top rated analyst) has a new $27 target in the stock and Jim Cramer has been saying $30 is realistic longer-term.
EXPECTATIONS FOR THE QUARTER: Given how well the stock has performed lately, it is really hard to fathom how the company would disappoint, although it wouldn't be fair to expect much more than $0.22 to $0.23 on EPS.
Regardless of the total combined net-net in all operations, the company probably has to be highly upbeat and show how well it is executing. In being a media conglomerate, and one that is still in the midst of a very long-term restructuring, the actual earnings and actual revenue numbers tend to have a bit more flexibility than say fixed technology companies with two products.
Going forward, it is likely is that the analysts will bring their price targets more in line with reality instead of the old model of "just stay negative, because the stock is stuck" model that actually worked for three years.
Also check out some other earnings reports that we're following, and let us know your thoughts on earnings expectations.
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