Time Warner divisions to boost Q3 revenue

Time Warner will report its third-quarter figures on Wednesday 5 November, and traders are expecting a decline in earnings on an annual basis. 

A man walking past a large CNN sign
Source: Bloomberg

This Wednesday’s update will be the second set of quarterly figures since Twenty-First Century Fox walked away from its takeover attempt of the firm in August. The day after Rupert Murdoch dropped his takeover bid, Time Warner reported earnings that smashed estimates. Its second-quarter EPS came in at $0.98 versus $0.84 estimated, and investors would like to see a continuation of the strong results.

The multimedia giant had a good second quarter, with revenue increasing by 3% to $6.8 billion. TV stations like CNN were helped by higher subscriptions and an increase in advertising sales, but the popularity of TV shows like True Detective were the highlight of the announcement. Revenue from Home Box Office (HBO) jumped by 17%, with season four of Game of Thrones its most watched show on pay-per-view TV.

By knocking back the $85-per-share approach from Twenty-First Century Fox, Time Warner is under pressure to add shareholder value. The company is expected to announce job cuts in the quarterly update, with HBO likely to see its headcount trimmed by 7%. Next year the company is launching an online streaming service that will help capture audiences who don’t have pay-per-view TV.

Equity analysts are very bullish on the stock. Out of the 37 recommendations 27 are buys and ten are holds; the average target price is $87.27. The number of traders taking short positions on Time Warner has dropped by 37% since Rupert Murdoch walked away from the takeover attempt; the amount of short interest on Time Warner has fallen to its lowest level in 2014.

The consensus is for third-quarter revenue and EPS of $6.1 billion and $0.94 respectively, compared to 2013’s revenue and EPS of $6.9 billion and $1.01.

The 200-day moving average of $71.27 is providing support. Strong figures and a positive full-year outlook could push the stock to October’s high of $80.89, and then the next level would be the $81.43 area (the gap in July).

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.