Time Warner (NYSE: TWX) reported second-quarter earnings this morning. The numbers, according to Bill Martin, surpassed Wall Street earnings forecasts, with its cable television revenue easily outweighing a drop in sales at its AOL Internet unit.
However, notes the editor of FindProfit newsletter, "A pullback in management's guidance for AOL advertising revenue growth is hitting the shares today, sending the stock down -3.2% to close at $18.64.
For Q2, he observes, TWX reported net income of $1.07 billion, or 28 cents a share, up from $1 billion, or 24 cents a share, last year. Earnings before discontinued operations and accounting charges came in at 25 cents a share, he states.
The advisor explains, "After one-time gains, it appears that TWX beat Wall Street estimates of 21 cents a share by around two cents per share. On the top line, revenue grew 6% to $11.0 billion, slightly below analyst estimates of $11.1 billion."
Updating its stock buyback program, he adds, TWX said it just completed $20 billion in stock buybacks, which retired about 23% of its shares outstanding from the market. The board has also authorized a new $5 billion stock repurchase program, according to Martin.
The advisor explains, "TWX's cable business continued to drive results for the media company. Revenues in the segment rose 59% to $4 billion. Operating income rose 31% to $711 million."
Looking forward, he states, TWX reaffirmed its full-year EPS guidance of $1.07 a share, which includes after-tax gains on sales of assets and investments. Analysts were looking for EPS of 98 cents.
The bottom Line, says Martin, "In general, TWX reported a solid quarter, but a pullback in guidance for AOL's advertising revenue growth is weighing on the shares."
All in all, he concludes, "While we recognize the market's concerns that AOL stay on track, we think investors are overdoing things a bit today. TWX continues to have a number of levers at its disposal to drive growth, and this should benefit patient holders. We would be buying the stock on today's dip."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.
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Reader Comments (Page 1 of 1)
8-02-2007 @ 8:34AM
Michael Schneider said...
Time Warner CEO Richard Parsons discussed the results yesterday in a televised interview- he attributed the AOL ad results to several factors and projected a "Blowout" 2nd half in the film division. Synopsis of his remarks and many items on media and media companies are available free right now at http://www.Barrelomedia.com.
8-02-2007 @ 11:14AM
JDaggitt said...
Time for Randy Falco to go?
It seems that the advertising results at AOL are dragging down TWX's stock price. Let us remember that Dick Parsons and Jeff Bewkes brought in Randy Falco in November to head up AOL. From the press release issued in November: AOL is showing early success in transitioning to an advertising-focused business model, and Randy is a first-rate choice to ensure AOL realizes its promise.
Well, it appears that AOL has failed to realize its promise and I assume that Mr. Falco will be called on the carpet regarding this. Oh no, this is TWX where no one is held accountable for failing to meet plan.