Earnings: Time Warner Inches Past Estimates; AOL Flat On 2 Percent Ad Growth

This story was written by Joseph Weisenthal.
Time Warner (NYSE: TWX) reported Q2 revenue of $11.55 billion, ahead of estimates of $11.45 billion, and a 5 percent increase from $10.98 billion. Op income for the quarter was up just 1 percent to. EPS for the quarter was $.24, just ahead of analyst estimates of $.23.

The strong divisions: Cable, filmed entertainment and the networks business. Weak: AOL and publishing.

-- AOL: The unit, whose planned split the company reaffirmed, saw a decline in revenue of 15 percent to $1.05 billion. Op income fell severely to $230 million from $350 million. The fall was due to a 29 percent decrease in subscription revenue (no surprise) and just meager, 2 percent growth in ad revenue. Within advertising, the company said third party growth helped offset a decline in AOL's network revenue. Of course, actual AOL network traffic is partly defendant on the access business, so you can't separate the results of the two sides entirely. The bad news for the access business is that unlike EarthLink it's not seeing profit growth on slashed costs.

-- Cable: In the process of being fully spun off revenue was up 7 percent to $4.3 billion. Video revenue was up 2 percent, while data grew 12 percent to $1 billion. During the quarter the company picked up an additional 200 thousand digital video subscribers and 201 thousand high speed subs (full details to be broken out in separate TWC post).

-- Filmed Entertainment: This has been a hero for several companies this quarter, and TWX is one of them. Revenue was up 14 percent to $2.6 billion.

-- Networks: Revenue was up 9 percent to $2.8 billion. Ad revenue held up strong, growing 11 percent in the quarter. Op income grew 18 percent to $749 million.

-- Publishing: Revenue fell 6 percent to $1.2 billion. Ad revenue fell 10 percent. The company says lossers were mitigated somewhat by higher digital magazine revenue at People.com, Time.com and CNNMoney.com, and then it offers the number $19 million. That appears to be growth over last year, but doesn't over a baseline. We'll listen for more on the call.

Bottom line: Outside of the weakness at AOL, it looks like a solid, in line quarter. In the prepared quote, CEO Jeff Bewkes makes one perfunctory comment about the challenging economy. In a separate release, the company says it's reaffirming its outlook for the year, of adjusted op OIBDA growth of 7-9 percent and EPS in the range of $1.07-$1.11 (current analyst estimates are for $1.08), so at the midpoint this is even a penny higher. We'll be looking for a lot more color on the overall and online ad market, the company's strategy and the "what's next" for AOL on the call.

Release | Webcast (10:30 AM ET)

By Joseph Weisenthal