Time Warner Takes Stake in Hulu, Q2 Profit Soars

TV networks led the way, while Warner Bros. continues to struggle

Before markets opened Wednesday, Time Warner reported revenue of $7 billion and earnings of $1.29 per share, beating profitability expectations once again as its TV networks made up for Warner Bros. poor start to the year.

That was shy of the $7.3 billion in revenue the company pulled in during the corresponding period last year, but topped the earnings of $1.25 a share. It also bested the average analyst estimate of earnings of $1.16 a share, although it fell short of the $7.1 billion in revenue they expected.

Time Warner has reported earnings per share better than analyst estimates for every quarter since the fourth quarter of 2008. Its stock is up 18 percent year-to-date.

“We had a strong first half of 2016, which puts us ahead of our original goals for the year. Our performance reflects the creative excellence resulting from investments we’ve been making in the very best content,” Time Warner CEO Jeff Bewkes said in a statement accompanying the earnings. “At the same time, we’re capitalizing on new distribution opportunities to take advantage of the growing demand for high-quality video content around the world.”

In the earnings release, Time Warner also announced that it has acquired 10 percent of Hulu and signed an agreement for its Turner networks to be carried on Hulu’s live streaming service beginning next year.

Time Warner’s TV networks drove its profitability. CNN has benefited from a surge in viewership during this election year, but an exciting March Madness college basketball tournament also boosted ratings on its Turner Sports divisions. HBO also showed growth over the last quarter.

But while rival Disney’s thriving movie studio and theme parks are carrying subscriber-shedding ESPN, Time Warner’s movie and television wings have the opposite dynamic. Its film studio, Warner Bros., has been on a two-year losing streak, with its “Batman v Superman: Dawn of Justice” one of 2016’s big-budget disappointments. The critically panned movie’s box office fell off a cliff during its second weekend, plunging by 69 percent, and the fallout led to an executive shakeup at Warner Bros.

Last year, Warner had its worst year since 2006, capturing only 14 percent market share despite releasing more movies than any other studio. This year, it’s also leading in number of films released, but is again wallowing at the same 14 percent market share

And that slump could continue with this weekend’s opening of “Suicide Squad,” Warner’s latest DC Extended Universe film and one that is tracking well so far, on pace to set an August record with a $140 million opening weekend. But as was the case for “Batman v Superman,” a wave of poor reviews could also mean a bigger-than-average week two drop for the film.

Time Warner will hold a conference call at 8:30 a.m. ET to discuss the earnings report.