Time Warner's profit beats Street, raises dividend

Media company Time Warner Inc reported fourth-quarter net income that beat estimates, raised its dividend and started a new stock repurchase program, sending its shares up 5 percent.

Time Warner, which owns the CNN and TNT cable networks, premium TV service HBO, People magazine and a movie studio, said on Wednesday it is raising its quarterly dividend by 11 percent to $0.2875 per share. The company's board also authorized a new $4 billion share repurchase program that started in January.

"The big surprise here is the incremental return of capital to shareholders with the new dividend and buyback," said Janney Capital Markets analyst Tony Wible, adding that the shares were up on that news.

The company expects 2013 adjusted earnings to rise in the low double-digits in percentage terms from $3.28 per share in 2012. This matches the 11 percent increase that analysts, on average, were expecting.

The results came a day after Walt Disney Co reported earnings that beat estimates and said it expects the next few quarters to be better because of a stronger lineup of films and increased attendance at its theme parks.

Time Warner's top executives will hold a conference call later Wednesday. Rival News Corp is due to report quarterly results after the market closes.

Time Warner also plans To take a $60 million restructuring charge at its Time Inc magazines unit in fiscal year 2013. On January 30, the division said it will cut about 500 jobs, or 6 percent of its total staff, across the business division and newsrooms. The layoffs mark the first major move made by Time Inc Chief Executive Laura Lang, who joined the company in January 2012.

Operating income at the cable networks rose to $1.38 billion from $1.14 billion a year ago. The company reported a 7 percent increase in subscription revenue, driven partly by more HBO subscribers. Advertising revenues in the cable unit rose 3 percent.

"It's similar to Disney, where you're seeing the affiliate fees picking up the slack for the weak advertising market," Wible said. Affiliate fees refer to the money that cable and satellite operators pay Time Warner to carry its cable channels.

Bernstein Research analyst Todd Juenger said he has "longer-term reservations about the positioning of some of the brands (especially the general entertainment cable networks)," but said, "Those weaknesses will be masked for several years by the affiliate fee renewal cycle."

Time Warner has said it expects major affiliate fee increases in the next three years as contracts come up for renewal. Juenger said this was already priced into the stock. Time Warner shares are up roughly 40 percent since January 1, 2012.

MOVIE UNIT REVENUES FALL

CNN, which is part of the cable unit and has struggled in the ratings, began to make long-awaited changes last week, announcing the departure of a longtime editor and several on-air personalities. The network tapped Jeff Zucker, the former CEO of NBC Universal, to be the news channel's worldwide chief in November.

Revenue at Time Warner's movie unit decreased 4 percent to $3.7 billion. It said the releases of "Argo" and "The Hobbit" helped offset declines in its home entertainment and video game business.

The film and television studio announced last week that Kevin Tsujihara would become CEO of Warner Bros. Entertainment, replacing Barry Meyer. He will begin the job on March 1.

Net income rose to $1.16 billion, or $1.21 a share, from $773 million, or 76 cents a share, a year ago.

Adjusted for impairment costs, the EPS was $1.17, which beat Wall Street estimates by 7 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 0.4 percent from a year earlier to $8.16 billion. Analysts were expecting $8.22 billion, according to Thomson Reuters I/B/E/S.

Shares rose 5 percent to $52.45 in early trading. (Reporting by Liana B. Baker; Editing by Jeffrey Benkoe)