Time Warner Inc raised its full-year outlook after quarterly revenue grew at the fastest pace in two years, thanks to a surge in advertising sales at its cable networks and strong turnouts for movies like Clash of the Titans.

The media conglomerate's improved forecast and better-than-expected second-quarter results on Wednesday come a day after CBS Corp's strong quarterly report, and could allay near-term fears that economic uncertainties would hurt the rebound in ad spending.

The third quarter appears to be strong even though the economy seems fragile, said Tom Eagan, an analyst at Collins Stewart.

Time Warner said second-quarter revenue rose 8 percent to $6.4 billion, beating the average analyst estimate of $6.2 billion according to Thomson Reuters I/B/E/S. Adjusted profit per share was 50 cents, against expectations of 45 cents.

Advertising sales rose 14 percent on an 11 percent rise at its cable network division, which includes CNN, HBO and TNT.

Still, investors are cautious about 2011 for media companies as they begin to face tough year-on-year comparisons. In 2010, advertising was bolstered by the Winter Olympics, and analysts expect political ads to pick up heading into the U.S. mid-term elections this November.

We wouldn't think one should get overjoyed just yet, warned Benchmark Co analyst Fred Moran about media companies being able to keep pace with growth next year. There remains a question of sustainability of the state of the overall economy and consumer demand.

U.S. economic data on Wednesday showed that private sector employment rose slightly more than expected in July, but the economy still has not gained the job-creating momentum to pull unemployment down from above 9 percent.

Shares of Time Warner, owner of CNN and HBO, rose 1.5 percent in early trading, while shares of CBS rose 3.3 percent. News Corp , which is due to report quarterly results after the market close, rose 0.6 percent.

OUTLOOK BRIGHTER

Time Warner said it expects adjusted earnings to be up at least 20 percent from a 2009 EPS base of $1.83. Previously, the company said it expected a mid-teens rise in EPS. Analysts, on average, had forecast 2010 EPS of $2.22, according to Thomson Reuters I/B/E/S.

In the second quarter, the filmed entertainment segment that encompasses Warner Brothers saw revenue increased 8 percent to $2.5 billion. The company cited strong ticket sales of Clash of the Titans and Sex and the City 2.

Publishing revenue from its magazine stable that includes People and Time was flat at $919 million, though ad revenue rose 4 percent.

The advertising recovery has clearly helped reaccelerate the growth rate of Time Warner, said Moran, the Benchmark analyst who has a buy rating on Time Warner.

The company reported net income of $562 million, or 49 cents a share, compared with $524 million, or 43 cents per share, from the year-ago period.

Along with peers like Walt Disney Co , News Corp, and Viacom Inc , Time Warner stock has treaded water in recent weeks after outperforming the broader market earlier this year.

Given the concerns over the macro-economy right now, it's a really strong result, said David Bank, an analyst with RBC Capital Markets, who rates Time Warner as a buy. At this point one would think it would bode pretty well.

(Reporting by Jennifer Saba, editing by Maureen Bavdek)

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