Time to Jump on the Time Warner Inc (TWX) Bandwagon?

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Time Warner Inc (NYSE:TWX)Time Warner Inc (NYSE:TWX)‘s Man of Steel film is performing well at the box office. Box Office Mojo says it grossed over $250 million worldwide (at the time of this writing). People seem to be enjoying the flick. And there’s been much talk about how the success of the project gives Time Warner Inc (NYSE:TWX) hope – hope that it can challenge The Walt Disney Company (NYSE:DIS) and its Avengers-universe Marvel asset with a dose of Justice-League heroism.

I’ve never seen The Avengers, but I know it’s been good to The Walt Disney Company (NYSE:DIS) and its shareholders. I’m actually fascinated by this new line of thinking, that Time Warner Inc (NYSE:TWX) is now a player and that CEO Jeffrey Bewkes might be able to take on the man that Wall Street believes to be one of the best leaders on the planet, Bob Iger. Seriously, the market acts as if Iger can do no wrong and that he himself is like the son of Jor-El. (I think Iger has done some good things, but I do sometimes beg to differ.)

So I’m wondering: since Disney is a perpetual buy based on Marvel and Lucasfilm and all that, what about Time Warner? That company’s comic-book division, DC Comics, which certainly isn’t some goofy nerdy upstart, might be able to offer up a bit of kryptonite to the Mouse’s superhero factory. Tim Beyers nicely summarizes the situation.

The ultimate question is now before us: Has Time Warner Inc (NYSE:TWX) become a perpetual buy just like The Walt Disney Company (NYSE:DIS)?

A transition awaits

I’ve tended to own Disney for most of my investing career although I currently don’t own any shares; I recently liquidated my position in a bit of profit-taking to combat a market that may have gotten ahead of itself. I’m pretty certain I’ll be in the stock again at some point.

But I’m wondering if I, and perhaps others, ought to be looking more closely at Time Warner Inc (NYSE:TWX). I never felt the need to own this equity. Even though the stock has done well over the last couple years, I figured Disney was enough exposure for a portfolio in terms of blockbuster content-production and distribution.

It’s the whole Justice League thing that’s grabbed my attention. No matter what any of us think, Disney doesn’t have a monopoly on the creative exploration of superhero-supervillain conflicts. DC has plenty of high-profile brand names. It doesn’t have Spider-Man, but it has Batman. It doesn’t have Hulk, but it has Aquaman. And other stuff. (I’m sorry, I’m not enough of a nerd to know more than that without checking, and I’m pretty sure Bugs Bunny does not qualify as a superhero; maybe that Road Runner creature does, though.)

Bob Iger is set to step down from his CEO position in 2015. In other words, Disney will have a new leader. If Iger is Disney right now, as many claim, than one has to do a little due diligence and wonder if a hedge for all the portfolios out there that own an outsized position of the Mouse is in order. Time Warner stock might be that hedge. The company has many impressive divisions besides DC: HBO, TBS, TNT, Warner Bros., etc.

Solid growth

According to the first-quarter earnings release, Time Warner Inc (NYSE:TWX) increased adjusted operating income by 7%, and it increased adjusted earnings per share by 22%. Top-line revenue of nearly $3.7 billion was mostly flat, but looking through the rest of the release and taking into account all of the media company’s assets, I would say things are going well. According to the latest annual report, cash flow from operations has remained rather steady the last few years, not seeing much growth — it was roughly $3.3 billion in 2010, and $3.4 billion in both 2011 and 2012.

Disney’s second-quarter earnings release shows a growing top line — revenues at the Mouse jumped 10%. Segment operating income went up by 29%. Adjusted earnings per share increased by 36%. And the latest annual report shows that cash flow from operations has been on the rise — it was $6.6 billion in 2010 and almost $8 billion in 2012.

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