What Were Turner’s Growth Drivers in Fiscal 2015?



Turner business segment

On February 10, 2016, Time Warner (TWX) reported its 4Q15 and fiscal 2015 earnings. The company’s Turner business segment posted revenues of $10.6 billion in fiscal 2015, a rise of 2% year-over-year. In 4Q15, revenues were $2.7 billion, up again by 2% over 4Q14.

This business segment had adjusted operating income of $4.1 billion in fiscal 2015, an increase of 32% over fiscal 2014. However, Turner’s adjusted operating income in fiscal 4Q15 declined by 15% to $781 million due to an increase in programming costs.

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Advertising revenues

When it comes to Turner’s revenue components, advertising revenues were up by 2% in fiscal 2015 and 5% in fiscal 4Q15. The reason for the growth in advertising revenues was the high-single-digit growth in domestic advertising in 4Q15. International advertising revenues were in the low double digits in 4Q15.

In comparison, The Walt Disney Company (DIS) had advertising revenues of $2.6 billion in fiscal 1Q16, a growth of 12% over 1Q15. Comcast’s (CMCSA) NBCUniversal Cable Networks segment had a marginal year-over-year decline in advertising revenues of 0.3% in 4Q15, while Viacom’s (VIAB) advertising revenues fell by 3% year-over-year in fiscal 1Q16.

In fiscal 1Q16, Time Warner expects advertising revenues for Turner to grow in the mid single digits.

Subscription revenues

Turner’s subscription revenues in fiscal 2015 increased by only 1% due to foreign currency headwinds. In 4Q15, Turner had a mid-single-digit growth in domestic subscription revenues. The company stated in its 4Q15 earnings call that it has achieved the rise in affiliate fees in its agreements with the top ten domestic distributors and expects subscription revenues to be in low teens in fiscal 1Q16.

Time Warner makes up 0.29% of the iShares S&P 500 (IVV). For an investor interested in exposure to computers, IVV has 3.9% exposure to the sector.


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