Time Warner Inc (TWX), Twenty-First Century Fox Inc (FOX): This Media Company Is Leaner and Meaner Than Ever

Page 1 of 2

Time Warner Inc (NYSE:TWX)Slimming down its business and focusing on its core competencies paid off for media giant Time Warner Inc (NYSE:TWX), which recently reported strong second-quarter earnings that surpassed analyst estimates. The company’s renewed focus on strengthening its television businesses, which currently account for 70% of its operating income, and the favorable box office performance of its major film releases boosted its top and bottom line.

However, considering that the stock has already risen more than 50% over the past twelve months, should investors hop on or wait for a pullback?

A strong second quarter

For its second quarter, Time Warner Inc (NYSE:TWX)’s earnings rose 46% to $0.83 per share, beating the consensus estimate by $0.08. Adjusted earnings nearly doubled from $0.42 to $0.81 per share. Revenue climbed 10% year-on-year to $7.4 billion, topping the $7.1 billion that analysts had expected.

By comparison, The Walt Disney Company (NYSE:DIS) earnings rose 2% from the prior year quarter as its revenue increased 4%. Disney met Wall Street forecasts on earnings, but missed on revenue.

Meanwhile, Twenty-First Century Fox Inc (NASDAQ:FOX), which separated from News Corp in June, reported a quarterly loss of $0.16 per share, an improvement from a loss of $0.64 per share last year. Fox’s revenue rose 16% from the prior year quarter.

Film and television are the engines for future growth

Revenue at Time Warner Inc (NYSE:TWX)’s Network division, which includes Turner Broadcasting and HBO, climbed 7% to $3.8 billion, accounting for over half of the company’s top line. Subscription, advertising, and content revenue rose 4%, 11%, and 5%, respectively. The segment’s operating income rose 13% to $1.3 billion. Strong growth at Turner Broadcasting was attributed to the NBA Playoffs and the 2013 NCAA tournament, which aired on TNT and TBS.

Revenue at Time Warner Inc (NYSE:TWX)’s Film and TV Entertainment segment, Warner Brothers, rose 13% to $2.9 billion, thanks to the robust box office performance of Man of Steel, The Hangover Part III, and The Great Gatsby. An increase in international television syndication and higher subscription revenue from video on demand offset a decline in domestic television licensing revenue. Operating income at the division rose 34% to $184 million.

Mightier than Mickey

Time Warner Inc (NYSE:TWX)’s strong growth across its television and movie segments notably outpaced both Disney and Fox last quarter.

The Walt Disney Company (NYSE:DIS)’s Media Networks segment, which includes ESPN, A&E, the Disney Channels, and ABC, reported a 5% increase in revenue to $5.3 billion, while operating income rose 8% to $2.3 billion. Disney struggled with a decline in program sales, lower advertising revenue, and higher prime time programming costs during the quarter.

The Walt Disney Company (NYSE:DIS)’s Studio Entertainment segment, which gained a lot of attention with its blockbuster Marvel releases, lost some of that magic with The Lone Ranger, which is expected to cause a loss between $160 million to $190 million in the fourth quarter. Total revenue at the segment declined 2% to $1.6 billion, as operating income plunged 36% to $201 million.

Luckily for Disney, robust gains at its theme parks and resorts helped offset those losses.

More focused than Murdoch

Twenty-First Century Fox Inc (NASDAQ:FOX), which retains News Corp’s TV and Film segments, also posted mixed numbers across the board. Fox’s cable network segment reported a 16% gain in revenue and a 25% surge in operating income before depreciation and amortization, fueled by higher fees from pay-TV operators and unexpected benefits from currency fluctuations. However, Fox’s growth is lopsided, with much stronger growth in its cable networks being offset by weaker results from its broadcast TV and film segments.

Page 1 of 2