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Time Warner Beats Earnings Expectations on Turner, Warner Bros. Growth

Media giant announces dividend 35 cents per share

Time Warner reported its earning for the second quarter on Wednesday before the stock market opened, beating Wall Street expectations thanks to growth from Turner and Warner Bros.

The media giant delivered earnings of $1 .25 on $7.3 billion in revenue, up from $0.98 and $6.8 billion a year ago.

Wall Street analysts had forecasted EPS of $1.03 on $6.90 billion in revenue, according to Yahoo Finance.

Turner networks and Warner Bros. were bright spots for the company as both recorded higher adjusted operating income. AOI spiked 15 percent to $1.9 billion thanks to growth at Turner and Warner Bros.; Turner was helped by its licensing deal with Hulu and growth internationally while Warner Bros. was helped by the debut of “Batman: Arkham Knight” and “Mortal Kombat X” along with TV syndication deals.

HBO dipped, no longer benefiting from the initial digital licensing deal with Amazon as it did during the same time period last year. The launch of HBO Now and the fifth season of “Game of Thrones” sparked subscription growth of four percent, but operating income dipped seven percent to $508 million thanks to higher content costs.

Time Warner’s net income rose  14 percent to $971 million, up from $850 million in the year-ago period. The company also issued a cash dividend of 35 cents per share.

Company CEO Jeff Bewkes praised Warner Bros. and Turner’s performance: “Our results were led by Turner and Warner Bros., and were achieved at a time when we’re investing aggressively to position the company for continued growth, including the successful launch of HBO NOW, our standalone domestic streaming service.”

“HBO and its sister service Cinemax recently received a combined 131 Primetime Emmy nominations, with a record 126 for HBO – the 15th year in a row that HBO has led in nominations. In addition to being nominated for Outstanding Drama Series, Game of Thrones’ fifth season set a new record for viewers of an HBO series.”

On the company’s earnings call, HBO CEO Richard Plepler previewed that HBO will make announcements about new OTT businesses and will follow the money. CFO Howard Averill said HBO Now will produce loses through the end of the year but will be highly profitable over time.

“We anticipate HBO Now will be a more material contributor to subscription revenue growth over time,” said Averill said. “We are pleased with the initial consumer response to the service, but we saw only a modest benefit to the sub revenue in the second quarter due to the 30-day free trial period for new subscribers.”

Plepler also said HBO Now has not negatively affected traditional HBO, claiming the company has seen  less than one percent of HBO subscribers leave the pay TV bundle to take HBO Now. HBO Now will be   “very profitable in the coming quarters,” he concluded.