Time Warner, the owner of the Warner Bros. studio and Turner cable networks that's being acquired by AT&T, posted third-quarter earnings that beat estimates with help from box-office hit "Suicide Squad" and higher fees from pay-TV providers.
Earnings excluding some items rose to $1.83 a share, New York-based Time Warner said Wednesday in a statement, exceeding the $1.37 average of analysts' estimates compiled by Bloomberg. The company also raised its forecast for the rest of the year, with the U.S. presidential election continuing to fuel viewership and advertising gains at news network CNN.
The results are an encouraging sign for AT&T, which agreed last month to buy Time Warner for $85.4 billion, forming a telecommunications and media empire that will own much of the programming it provides to subscribers of its wireless, internet and pay-TV services. Once the deal closes, Time Warner shareholders will own 14.4% to 15.7% of AT&T shares.
Investors are skeptical that a marriage between the companies will be approved by regulators, with Time Warner shares still trading well below the offer price of about $107.50 a share. Time Warner stock rose 1.4% to $89.50 in early trading Wednesday.
Third-quarter revenue rose 9% to $7.17 billion, compared with projections for $6.97 billion. Revenue at the Turner cable-network unit, which include TNT, CNN and TBS, climbed 8.8% to $2.61 billion from a year earlier. The unit benefited from increases of 12% in subscription revenue and 33% for licenses to use the networks' programming.
CNN helped lead Time Warner to a 2% gain in ad sales for Turner, though the cable division's programming expenses also climbed 5% in part because of the costs of covering the presidential campaign.
While Turner benefited from international growth, it continued to lose U.S. cable subscribers, Time Warner said. Revenue at HBO, with popular shows like "Game of Thrones," rose 4.3% to $1.43 billion. The company saw a 5% rise in subscription revenue but a decline of 2% in content revenue.
Revenue at Warner Bros. studio rose 6.7% to $3.4 billion on the strength of box-office releases of "Suicide Squad," "Sully" and "Lights Out."
Time Warner forecast adjusted earnings for continued operations for the year of $5.45 to $5.55 a share, leaving out a one-time tax benefit of 28 cents a share. Analysts had projected $5.42 on average.
Time Warner CEO Jeff Bewkes has spent billions to create original programming and acquire sports rights to attract viewers and command higher fees from distributors to keep his media company afloat in a declining pay-TV industry. At the same time, he's trying to win over the growing legions of cord-cutters who don't pay for cable. In August, Time Warner bought a 10% stake in Hulu and announced that Time Warner's networks will be carried on Hulu's live-streaming service, which is slated to start early next year.
Time Warner has also focused on digital expansion, including the the sports website Bleacher Report, its web-only version of HBO and CNN. And the company has sold channels in new online TV packages like AT&T's DirecTV Now and Dish Network Corp.'s Sling TV.
-- Bloomberg News