What’s Next for Time Warner (NYSE:TWX) After Earnings Beat?

What’s Next for Time Warner (NYSE:TWX) After Earnings Beat?

Time Warner Inc (NYSE:TWX) reported better than expected earnings for the fourth quarter though its sales fell shy of Wall Street analysts’ expectations. Its net profit grew 19.4% on lower income tax as the top line dipped 5.9% in the December quarter. Moving ahead, the company boosted its adjusted earnings forecast by five cents a share for the current year. That apart, the cable firm also announced a $5 billion share buyback plan.

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Results were impressive considering Wall Street’s fear of how cord-cutting could eat away at traditional media companies’ bottom lines. These results allay those fears slightly, though the revenue drop perhaps was a small sign of the cord-cutting effect.

4Q Results

Time Warner said that its net income grew 19.4% to $857 million from $718 million while earnings surged 26.2% to $1.06 a share from 84 cents a share in the year-ago quarter. On an adjusted basis, earnings advanced 8% to $1.06 from 98 cents a share. EPS growth was attributed partly to a lower share count. Wall Street analysts predicted the company to earn $1.01 a share.

Total revenues dipped 6% to $7.08 billion from $7.53 billion last year, which was significantly lower than the Street analysts’ expectations of $7.53 billion. Warner Brothers contributed less revenue in the most recent quarter than the previous year period while other segments remained more or less flat or witnessed modest growth. The company closed the quarter with cash and equivalents of $2.16 billion while free cash flow was $3.6 billion.

Outlook Increased

So what’s next for Time Warner? Outlook is upbeat according to the company. Going forward, Time Warner boosted its adjusted earnings forecast to $5.30 – $5.40 a share for 2016 from $5.25 a share announced in November. In fact, the company slashed its adjusted EPS guidance from $6 citing a strong dollar. The latest earnings outlook is better than the Street analysts’ predictions by four cents a share.

Last year, Time Warner bought back 45 million shares by shelling out $3.6 billion in the process. Including its dividend, the company returned $4.8 billion to its shareholders last year. In the current year alone, it has repurchased seven million shares. The company disclosed a new share buyback program worth $5 billion, which included any amount pending from the previous authorization. The company also boosted its quarterly dividend by 15% to 40.25 cents a share.