Time Warner managed to surprise analysts for the second time in two weeks, reporting stronger than expected third quarter earnings, with revenue up 9% and adjusted operating income ahead by 12% as it continues to focusing on convincing investors and regulators that its $108.7 billion ($107.50 per share) merger with AT&T is the right move.
AT&T and Time Warner announced their blockbuster deal last week, but has received some backlash from some regulators who see the deal as creating another unwieldy content and distribution giant while shareholders fear the deal won’t win approval.
That aside, the third quarter was particularly strong for the content company, with growth across the board.
Sanford Bernstein media analyst Todd Juenger wrote in a research note early Wednesday that results “far exceeded” expectations, adding that “if the increased 2016 earnings base flows through to 2017, ATT shareholders are getting more for their $107.50 than they originally thought.”
At its Turner pay TV networks, revenue increased 9% to $2.6 billion, bolstered by an increase in affiliate fees and a 2% rise in advertising sales. Adjusted operating income at the unit was up 12% to $1.2 billion in the period.
At premium channel Home Box Office, revenue rose 4% to $1,4 billion and AOI increased 2% to $530 million. Its Warner Bros. unit saw revenue rise 7% to $3.4 billion and AOI was up 12% to $433 million in the quarter.
“We had a strong third quarter, which keeps us on track to exceed our original 2016 outlook and underscores our leadership in creating and distributing the very best content,” chairman and CEO Jeff Bewkes said in a statement. “In television, HBO took home more Primetime Emmy Awards than any other network for the 15th consecutive year and Time Warner’s divisions won a total of 40 Emmys, more than any other company. CNN’s standout election coverage made it the #1 news network in primetime among adults 18-49 for the fourth consecutive quarter and Turner’s momentum doesn’t stop there. Year-to-date, TBS, TNT and Adult Swim are three of the top five ad- supported cable networks in primetime among adults 18-49. In film, Warner Bros. had a strong quarter led by Suicide Squad and has the #1 release of the fall in Sully, while anticipation is off the charts for J.K. Rowling’s Fantastic Beasts and Where to Find Them, which hits the big screen on November 18.” Mr. Bewkes continued: “The agreement we announced on October 22 to be acquired by AT&T Inc. represents a great outcome for our shareholders and an excellent opportunity to drive long-term value well into the future. Combining with AT&T is the natural next step in the evolution of our business and allows us to significantly accelerate our most important strategies.”