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What Drove Time Warner’s Earnings and Revenues in 4Q17?

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Key highlights of 4Q17 results

Time Warner (TWX) reported impressive fourth quarter and fiscal 2017 results on February 1. The media company posted better-than-expected results for both earnings and revenues. Notably, TWX has been consistently posting better-than-expected earnings and revenues for the past few quarters.

In 4Q17, Time Warner reported adjusted EPS (earnings per share) of $2.66, which includes a tax gain of $1.06 related to the latest tax reform. Excluding the tax benefit, adjusted earnings came in at $1.60, higher than its 4Q16 results of $1.25 and higher than the consensus estimate of $1.43 per share.

Time Warner also exceeded its Wall Street expectation for revenues in 4Q17. Time Warner posted revenues of $8.6 billion in 4Q17, up from $7.89 billion in 4Q16 and higher than the Wall Street expectation of $8.4 billion.

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Drivers in 4Q17

The upbeat fourth-quarter results were driven by strong top-line growth in all the operating divisions of the company. The revenues and operating income of each of Time Warner’s segments—HBO (Home Box Office), Warner Bros., and Turner—grew on a YoY (year-over-year) basis in 4Q17.

The company’s Turner Network, which includes TNT and CNN, saw its revenues rise 10% YoY to $3.1 billion, driven by higher subscription, content, and ad income. Meanwhile, revenues generated from HBO grew 13% YoY to $1.7 billion, driven by the increasing popularity of Game of Thrones. HBO added over 5 million subscribers in 2017.

Warner Bros. generated revenues of $13.9 billion in 4Q17, which was 6% higher YoY, driven by strong growth in theatrical, television, and game revenues. Warner Bros. witnessed its best-ever box office revenues of over $5 billion in 2017, thanks to films like It and Dunkirk.

Concerns

However, Time Warner remains concerned about the sluggishness of its television business and the growing popularity of online streaming services from Netflix (NFLX), YouTube from Alphabet (GOOGL), and Amazon Prime (AMZN), which are hurting Time Warner’s subscribers. The company’s merger deal with AT&T (T) is also facing challenges after the US Justice Department blocked the deal.

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