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What’s Driving Time Warner’s Stock Price Up?

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Time Warner’s year-to-date stock rise

On July 25, 2016, Time Warner’s (TWX) stock closed at $78.50. It has risen 21.8% year-to-date. Time Warner is expected to announce its fiscal 2Q16 results on August 3.

In contrast, The Walt Disney Company (DIS) has seen its year-to-date stock price fall 8.4%. Viacom (VIAB) and 21st Century Fox (FOXA) have seen their stock prices rise 10.9% and fall by 1.6%, respectively, year-to-date, as the chart below shows.

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What could be benefiting Time Warner stock?

Time Warner is seeing strong demand for its content, not only in the United States but also in international markets. As a result, it expects a rise in advertising and subscription revenues.

The company is also expecting strong growth in adjusted operating income in the second half of 2016. However, during its fiscal 1Q16 earnings call, the company pointed out some factors that could affect operating income. These include “the timing of content licensing revenue, the comparison to strong video games profits at Warners in last year’s quarter, and programming investments at Turner.”

Time Warner is expecting its adjusted EPS (earnings per share) to be $5.30–$5.40 in 2016.The company also expects a very strong free cash flow in 2016. At the end of fiscal 1Q16, Time Warner had a free cash flow of $714 million.

In this series…

In this series, we’ll look at Time Warner’s outlook for its affiliate fees and advertising revenues. We’ll also look at the strategic importance of digital platforms like HBO Now for Time Warner and the outlook for business segments such as Turner, Warner Bros., and HBO.

Finally, we’ll look at some of the company’s valuation metrics. First, let’s see how Wall Street analysts are viewing Time Warner.

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