Quarterly profits rose 5 percent at Time Warner Inc., as the media conglomerate reported particular strength in its cable unit and exceeded Wall Street's earnings forecasts Wednesday. The company also is set to spend another $5 billion buying back shares.
From April through June, the parent company of AOL, CNN, HBO, Fortune and Sports Illustrated earned $1.07 billion, 28 cents per share, ahead of last year's profit of $1.01 billion and 24 cents per share. Revenue rose 6 percent to just under $11.0 billion.
Excluding discontinued operations and gains from an accounting change, Time Warner said it would have earned 25 cents a share. On that basis, analysts polled by Thomson Financial were expecting Time Warner to make 21 cents per share. The revenue forecast had been $11.1 billion, slightly higher than what was achieved.
Time Warner also affirmed its full-year guidance, with Chairman and CEO Dick Parsons saying the first-half performance "keeps us firmly on track to achieve all of the company's full-year financial objectives." The company said it expects earnings before one-time items of $1.07 per share in 2007.
Parsons said that Time Warner's latest stock buyback plan, with $5 billion authorized by the board, was "building on this success." The company just completed $20 billion in stock repurchases, taking about 23 percent of its outstanding shares off the market.
Looking at Time Warner's segments, revenue in the AOL Internet unit dropped 38 percent to $1.3 billion, but the crash was largely expected. AOL has been shifting from its subscription model centered around selling Internet access to an advertising-focused approach in which many AOL services are now free. AOL's operating income rose 9 percent to $360 million.
However, AOL's ad revenue rose just 16 percent, well below the growth of more than 40 percent seen in each of the past four quarters.
Time Warner Cable, which also trades as a separate stock since a partial spinoff this year, saw revenue jump 59 percent to $4.0 billion, helped largely by subscribers acquired in deals with Adelphia Communications Corp. and Comcast Corp. Cable TV and high-speed Internet access growth were both strong. Operating income in cable rose 31 percent to $711 million. Cable's net income dropped 8 percent to $272 million, but it beat analyst forecasts.
In the Warner Bros. and New Line Cinema entertainment studios, revenue decreased 5 percent to $2.3 billion, despite strong showings at the box office by "Ocean's 13" and "300." Time Warner said the prior year's quarter had been exceptionally strong. Operating profit in the segment dropped 43 percent to $81 million.
In the networks unit, which includes HBO and Turner Broadcasting, revenue fell 1 percent to $2.6 billion, with advertising hurt by the end of The WB Network's operations in September 2006. Income in the unit increased 4 percent to $634 million.
At the Time Inc. publishing segment, revenue was flat at $1.3 billion. Ad revenue and digital sales were up slightly. Operating income rose 13 percent to $256 million.
In the first half of 2007, Time Warner, based in New York, earned $2.27 billion, 59 cents a share. In the first half of 2006, the company earned $2.48 billion, 56 cents per share. First-half revenue rose to $22.2 billion from $20.6 billion.