Time Warner 1st-quarter net income climbs on better ad revenue, strong home video sales

Time Warner 1Q net income up on better ad revenue

LOS ANGELES — Time Warner Inc. on Wednesday posted its first quarter of advertising revenue growth in a year and a half, a trend that lifted cable channels such as TNT and magazines such as People.

Along with the successful release on DVD of Warner Bros.’ “The Blind Side” and “Sherlock Holmes,” the media company posted its most profitable quarter ever, with first-quarter net income up 10 percent. It also upgraded its outlook for the full year.

The company said earnings should rise “at least in the mid-teens” on a percentage basis from a year ago, when it posted adjusted earnings of $1.83 per share. That implied earnings per share of $2.10 or more this year. Its forecast from February was similar but didn’t include the words “at least.”

Analysts surveyed by Thomson Reuters were already expecting $2.15 per share this year on an adjusted basis. But Time Warner executives said their forecast may be conservative.

“It’s not like we’re seeing anything bad out there, but we’re mindful that it’s still early in the year,” said Chief Financial Officer John Martin. Still, Time Warner shares fell 82 cents, or 2.5 percent, to $31.85 in afternoon trading Wednesday amid a broad market decline over European debt worries.

Time Warner earned $725 million, or 62 cents per share, for the period ended March 31, up from $660 million, or 55 cents per share, a year earlier.

Removing one-time items, profit was 61 cents per share, handily beating the 48 cents expected by analysts polled by Thomson Reuters.

Revenue climbed 5 percent to $6.32 billion from $6 billion, the biggest increase in almost two years. Analysts were looking for $6.29 billion in revenue.

Analyst Frederick Moran of The Benchmark Co. said that the results were “extremely impressive” and that the conservative outlook represented a worst-case scenario such as a big movie failing or the start of a double-dip recession.

“That number could easily be $2.20 or $2.25 given how solid the advertising improvement looks and their strong slate of films” including the next “Harry Potter” movie due in 3-D in November, he said.

The company reported earnings after a couple of major programming deals. Last month it teamed up with CBS Corp. to spend $10.8 billion for the rights to carry the NCAA “March Madness” college basketball tournament through 2024. About two-thirds of the programming will end up on Time Warner’s Turner TNT, TBS and truTV. Weeks earlier, TBS announced it was adding former “Tonight Show” host Conan O’Brien to its late-night lineup ahead of George Lopez starting in November.

CEO Jeffrey Bewkes called the basketball deal a “game changer” for the Turner networks. And he boasted that with O’Brien and Lopez, “Turner will essentially own late-night television.”

The company’s network division increased revenue 9 percent, helped by more subscription revenue at its premium HBO channels and a 9 percent rise in advertising revenue at Turner. The filmed entertainment unit, which contains Warner Bros., reported a 2 percent revenue increase mainly on its improved home video sales.

The improving ad market and cost cutting also helped Time Warner reverse losses at the publishing segment, which includes Time Inc. magazines such as Time and Sports Illustrated. Revenue for the publishing division dipped 1 percent. But it had a surprise 5 percent increase in ad revenue — the first growth since the fourth quarter of 2007 — and a 2 percent rise in subscription revenue.

First-quarter results across the media business, including Viacom Inc., Comcast Corp. and News Corp., have brought evidence that companies are more comfortable putting money into marketing their products as the recession fades.

However, The Washington Post Co. said Wednesday that it remains unable to end years of losses at Newsweek and will try to sell the publication.

AP Business Writer Michelle Chapman in New York contributed to this report.