Time Warner Inc's fourth-quarter profit and revenue beat Wall Street expectations, thanks to a 21 percent jump in cable advertising sales from programs like Conan O'Brien's late night talk show.
The company, whose shares rose 3 percent in premarket trading Wednesday, also raised its quarterly dividend by 11 percent and increased its stock repurchase buyback plan to $5 billion.
Fourth-quarter earnings adjusted for discontinued operations of AOL were 67 cents per share beating analysts average estimate of 62 cents per share, according to Thomson Reuters I/B/E/S.
Time Warner's soaring advertising revenue from its cable networks division, which includes CNN, TNT and TBS, surprised analysts and underscored a rebound for the traditional TV sector.
"It's a sign of just how strong the cable advertising network market is," said Alan Gould, an analyst with Evercore Partners, who added it should bode well for other media companies like Viacom, Discovery Communications and Scripps Networks.
Indeed, News Corp, which is set to report earnings later Wednesday, is expected to see mid-teens percentage gains at its cable networks boosted in part by advertising sales.
"(Time Warner Chief Executive) Jeff Bewkes is clearly navigating and benefiting from the economic and advertising recovery while being extremely supportive of the stock in the form of dividend increase and aggressive share repurchasing," said Frederick Moran, an analyst with the Benchmark Co.
The advertising rebound coincides with fresh threats from online services including Netflix and Hulu that offer TV shows and movies for under $10 per month. U.S. cable TV subscribers pay on average $70 per month.
Since late last year, Bewkes has attacked Netflix's business plans, batting down concerns that the streaming video and DVD mail service for movies and TV shows poses a challenge to Time Warner and its HBO premium pay cable channel. Earlier this month, Bewkes compared Netflix to a 200-pound chimp rather than an 800-pound gorilla.
Still, total fourth quarter revenue rose 8 percent to $7.8 billion, besting analysts' average forecast of $7.47 billion, according to Thomson Reuters I/B/E/S.
At its cable networks division, total revenue rose 14 percent to $3.3 billion, on strong subscription fees and ad sales.
Time Warner also expects 2011 adjusted earnings per share to be up in the "low teens" percentage growth range off a 2010 adjusted EPS base of $2.41, ahead of what Wall Street is expecting. Analysts on average forecast 2011 earnings growth at 9 percent.
"Most investors would have been happy if they got it at 10 percent growth," said Moran. "It's a nice jump."
Net income at the media company was $769 million, or 68 cents per share, compared to $631 million, or 53 cents per share during the same period last year.
At its filmed entertainment division, which includes Warner Bros, revenue rose 10 percent to $3.6 billion in the fourth quarter due mainly to higher TV license fees.
Publishing revenue fell 4 percent to $1.1 billion due to lower advertising and subscription sales at its magazines, which include Time, People and Sports Illustrated. The ad revenue decline was partially affected of the transfer of two websites, SI.com and Golf.com to its cable networks division.
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