Time Warner Inc posted a higher-than-expected quarterly profit and raised its full-year earnings forecast in a sign that advertising sales at cable networks such as TNT are recovering and cost cutting at the Warner Bros film studio is paying off.

The surprising results from the media powerhouse -- earnings per share beat analyst forecasts by about 15 percent -- come during a major repositioning at Time Warner, which has spun off Time Warner Cable and is about to spin off AOL. It shares fell slightly in early trade.

Gone are the days when Time Warner could create a TV show at its studio, broadcast it over a cable channel, and sell access to that cable channel to the customer.

Instead, Chief Executive Officer Jeff Bewkes wants to concentrate on one big business: creating content. He has also taken a hard line on costs, a strategy that is underpinning results and cheering investors, who have driven the stock up by about a third in the last six months.

Bewkes said 2009 earnings from the combination of Turner Broadcasting, Time Inc, and Warner Bros -- its content businesses -- would surpass those of last year by about 23 percent. He also raised the company's full year outlook.

Analysts credited Time Warner's efforts to cut back on expenses, particularly at Warner Bros.

Cost containment has been thematic to the Jeff Bewkes regime, said David Miller, an analyst with Caris & Co. He demonstrated this hawkish ability to keep an eye on costs once again.

Third-quarter net income fell to $661 million, or 55 cents a share, from $1.07 billion, or 89 cents a share, a year earlier. Adjusted profit was 61 cents a share, compared with the 53 cents analysts expected, according to Thomson Reuters I/B/E/S.

Revenue fell 6 percent to $7.1 billion, roughly matching Wall Street forecasts.

In a pattern made clear in this week's rush of results, media companies with cable properties are finding their footing more quickly as the economy starts to improve.

At both Discovery Communications and Viacom Inc, ad sales and distribution revenue for cable networks showed signs of life [ID:nN03514631].

At Time Warner's cable networks, including Turner Broadcasting and HBO, revenue rose to $2.87 billion from $2.73 billion. Subscription revenue rose 9 percent. Advertising sales fell, but only 1 percent, which will probably be taken as a sunny sign in the media industry.

Revenue dropped at Warner Bros and Time Inc, the largest U.S. magazine publisher. It also fell at AOL, the Internet property that Time Warner is spinning off in December.

As for the full-year forecast, Time Warner said adjusted earnings per share should rise to at least $2.05, compared with analysts' forecast of $2.02. Previously, it said earnings would be similar to those of the year ago's $1.98 a share.

The current forecast includes a $100 million restructuring charge that the company will take in the fourth quarter to help revamp its publishing division.

Shares of Time Warner fell 34 cents to $29.82 on the New York Stock Exchange.

(Reporting by Paul Thomasch; Editing by Lisa Von Ahn and Derek Caney)

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