Time Warner Unveils $5 Billion Stock Buyback, Earnings Rise Thanks to HBO

Time Warner reported results for its second financial quarter after outmaneuvering Rupert Murdoch’s takeover play and shedding its publishing business.

Despite the corporate drama, it was a stronger quarter than expected. Driven primarily by the continued strength of HBO, the company’s revenue grew 3% to $6.8 billion for the three months ending in June, while net income topped out at $850 million, a 10.3% gain from $771 million in the year-ago period. Earnings per-share rose 29% to 98 cents.

The big news, one meant to appeal to shareholders who may have been tempted by 21st Century Fox’s overtures, is the announcement of a $5 billion share buyback program. That brings the amount available for repurchasing to $6.5 billion and will likely be a carrot to convince investors of the merits of continuing as a standalone company.

It has yet to bolster the stock, which is down more than 11% in pre-market trading.

Chairman and CEO Jeff Bewkes labelled it a “milestone” fiscal period in his statement, saying, “We had another strong quarter, reflecting the strength of our businesses and our potential for continued growth as we deliver on our strategic plan to be the world’s leading video content company.”

Profits beat Wall Street’s expectations, while revenue fell short of estimates. Analysts projected net income of $753.2 million, or 84 cents per share, and revenue of $6.9 billion.

HBO benefited from buzzy seasons  of “Game of Thrones” and “Silicon Valley,” pushing revenues at the premium cable channel up 17% to $1.4 billion and operating income up 19% to $548 million. That helped offset a weaker slate of releases from Warner Bros. The studio’s recent films such as “Blended” and “Godzilla” failed to hit the same heights as last year’s “Man of Steel” and “The Great Gatsby,” sending  revenues down 2% to $2.9 billion. Operating income did rise 29% to $234 million, bolstered by the home entertainment performance of “The Hobbit” sequel and “The LEGO Movie.”

Time Warner’s Turner unit, which includes TNT and TBS, saw revenues climb 5% to $2.8 billion, due in part to advertising gains associated with broadcasting the NCAA Tournament. Operating income jumped 14% to $929 million.

The media conglomerate got a little leaner during the past two months, spinning off Time Inc. into a separate, stand-alone company devoted primarily to magazine properties such as Entertainment Weekly, Sports Illustrated and Fortune. As a parting gift, it sent it off into the world with $1.3 billion of debt.

That move was widely hailed by Wall Street, but did make Time Warner more vulnerable to Murdoch and 21st Century Fox’s merger overtures. On Tuesday, Fox said it was withdrawing its $80 billion, $85 per share, bid.

Time Warner recast its year-ago results to reflect that it no longer houses Time Inc. in its suite of divisions.

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