Tax Reform Helps Boost Time Warner Profits

Q4 revenue up 9%; operating income rises 13%
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Strong increases at its cable networks and a significant tax break helped boost Time Warner profits in the fourth quarter by more than four-fold, the company announced Thursday.

Consolidated revenue for the period was up 9% to $8.6 billion and operating income rose 13% to $1.9 billion. Net Income for the period was $1.4 billion, or $1.75 per share, more than four times the $317 million, or 40 cents per share of the prior year and was mainly boosted by a $1.06 per share tax provision benefit due to tax reform legislation enacted at the end of the year.

At its Turner Networks, revenue increased 10% in the quarter to $3.1 billion and operating income was up 22% to $1 billion. Domestic advertising revenue, bolstered by the Major League Baseball playoffs, was up 2%. For the year, revenue was up 7% to $12.1 billion while operating income increased 3% to $4.45 billion.

Affiliate fees at Turner were up about 14% (above analysts’ consensus estimates of 12% growth) but could be the last gasp for double-digit increases, as Turner guidance is for mid-single digit growth for 2018. Turner expects domestic ad revenue to increase in the high single- to low double-digit percentages in the first quarter, fueled mainly by an expected 5 percentage point boost from its scheduled airing of the Final Four of the NCAA Men’s Basketball Tournament in March.

At Home Box Office, a strong increase in subscribers – it added 5 million HBO and Cinemax subscribers during the year – helped raise revenue 13% in Q4 to $1.7 billion, while operating income increased 13% to $486 million. For the full year, revenue was up 7% to $6.3 billion and operating income rose 12% to $2.2 billion.

“We had another very successful year in 2017, achieving our financial goals thanks to the great creative and programming excellence across Time Warner,” chairman and CEO Jeff Bewkes said in a statement. “…Led by its great content, Home Box Office delivered its highest increase in domestic subscribers ever in 2017 and its best subscription revenue growth in over 20 years. Turner continued to deliver exceptional value with TBS, TNT and Adult Swim all ranking among ad-supported cable’s top five networks in primetime among adults 18-49 for the year. Turner claimed the #1 comedy across all television among adults 18-34 with Adult Swim’s Rick and Morty, and CNN was the #1 digital news destination for the second year in a row. We remain excited about the proposed merger with AT&T, pending judicial review, and the potential to accelerate our pace of innovation and connect more directly with consumers.”

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