Time Warner Earnings Preview: NBA And HBO Viewership Drive Revenue

Time Warner Inc. (NYSE: TWX), one of the world's largest media conglomerates, is expected to have increased revenue and earnings per share in the first quarter, as viewership in its cable television division increases.

The New York-based company reports Wednesday before markets open. It is forecast to have first-quarter revenue of $6.8 billion, up from $6.6 billion in 2011, according to analysts polled by Thomson Reuters. Earnings per share are predicted to rise to 64 cents, up from 58 cents in the prior year.

The bulk of the company's cash flow, around 70 percent, comes from its cable networks, including CNN, TBS and TNT, through licensing deals and advertising. Time Warner said last week that TNT had the highest-rated and most-viewed NBA regular season in its 28-year history with the league, which should boost revenue compared to the prior year. Household viewership rose to 1.90 billion from 1.79 billion in the prior year. The season was shortened to 66 games from 82 because of the temporary NBA lockout.

They have a lot of solid franchises in their cable network group, said Michael Corty, an analyst with Morningstar.

One of the company's most successful operations is the premium cable channel HBO, whose Game of Thrones and True Blood television series have had strong ratings and critical reception. The number of HBO subscribers, who pay $15 on top of regular cable fees, increased by 200,000 to 28 million in 2011. Time Warner has also expanded the number of platforms that support HBO Go, the web streaming service for subscribers.

Around 20 percent of the company's revenue comes from its film division, which includes Warner Bros. Pictures and New Line Cinema. The performance of the company's films is difficult to predict from a revenue standpoint, because of the uncertain timing of production costs.

But analysts said Time Warner may suffer this year due to the conclusion of its Harry Potter movie series, adapted from the popular novels by J.K. Rowling. The final film, Harry Potter and the Deathly Hallows - Part 2, became the third-highest grossing film of all time in 2011, with ticket sales of over $1.3 billion. In the fourth quarter, it was one of the most pre-ordered DVD and Blu-ray titles ever, according to Amazon.com. Quarter-over-quarter revenue may fall because the first quarter lacks a blockbuster.

For the year, it's going to be hard to match what they did in 2011 in terms of operating profit in the film division, said Corty

Time Warner's publishing division, which includes magazines like Time, Sports Illustrated and People, accounts for less than 10 percent of its revenue, so fluctuations in print advertising should not have large impact on the company's financials.

Time Warner's 2012 guidance calls for low double-digit growth in its earnings per share compared to the prior year.

Shares of Time Warner were up 61 cents to $38.08 in mid-Tuesday trading.