Before the opening bell Wednesday, Time Warner (NYSE:$TWX) reported its second quarter earnings. The outcome of the entertainment conglomerate’s earnings was caused by two factors in particular: A) “Wonder Woman’s” box office success, and B) subscriber growth at Time Warner’s cable operations.
Let’s get into the numbers:
Time Warner profits surpassed Wall Street expectations with an EPS of $1.33, which is up from $1.29 per-share in the 2016 period. Despite operating income falling 8% to $1.7 billion, revenues still increased 5% to $7.3 billion. Analysts had forecast that Time Warner would report per-share earnings of $1.19 on revenue of $7.3 billion.
The earnings report comes at a critical time, as the New York City-based company is awaiting approval from the government for its $85 billion sale to AT&T (NYSE:$T). If all goes as planned, Time Warner expects the deal to close by the end of the year. In fact, even without the seal of approval, AT&T is moving forward with its plans to integrate the entertainment conglomerate into the fold. Just last week, AT&T disclosed that John Stankey will serve as CEO, thus giving him total control over Time Warner’s properties. To put this into perspective, Time Warner’s properties include the following: the film studio Warner Brothers, the cable segment Turner, and the premium cable behemoth HBO.
Speaking of Warner Brothers, the film studio had a bit of a mixed quarter. Revenue increased 12% to $3 billion as “Wonder Woman” brought in massive crowds and “Fantastic Beasts and Where to Find Them” opened on home entertainment platforms. Still, operating income dropped 28% to $223 million. Additionally, Warner Brothers experienced a massive flop with the film “King Arthur”.
In terms of HBO, revenues increased 1% to $1.5 million due to higher subscriber numbers. That said, the channel behind “Game of Thrones” did experience some declines in home entertainment and international licensing revenues. Operating income grew 10% to $531 million, helped by lower programming costs.
In addition, Donald Trump seems to be good business for news outlets. Trump’s approach to news cycles ended up creating huge ratings for CNN, which is one of Turner’s flagship properties. In fact, this was CNN’s most-watched second quarter ever. The cable division saw its revenues grow by 3% to $3.1 billion, as higher subscriber numbers counteracted advertising declines.
“These results and accolades reflect strong execution and the investments we’ve been making, both in the best content and in ensuring that we deliver our content across platforms to offer engaging experiences for our audience,” CEO Jeff Bewkes said. “Accelerating our pace of innovation and being able to connect more directly with consumers are among the exciting reasons for our proposed merger with AT&T.”
It’s worth noting that, due to its pending sale to the telecom giant, Time Warner will not host an earnings call.
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