Slog Drags on at Time Warner

This week's earnings report looks unlikely to contain a major catalyst.
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Time Warner

(TWX)

investors will be looking for something to lift their sagging spirits when the company reports first-quarter results Wednesday.

Shares in the world's largest media conglomerate have been flat since the start of the year, despite signs of strength across most divisions. But investors looking for a significant move will probably have to wait a little longer for an uplifting catalyst.

The company continues to see solid growth at its cable division. But single-digit growth in entertainment and publishing, coupled with ongoing turmoil at AOL, will likely tone down results.

Analysts surveyed by Thomson First Call are looking for the company to make 20 cents per share on $10.89 billion in revenue for the quarter.

"Time Warner Cable should again experience a strong growth quarter," writes Prudential analyst Kathy Styponias in a note previewing its earnings. "Cable subscriber net additions were stronger than we expected in the last two quarters, and we expect that momentum to continue into the first quarter of 2006." Within cable, Prudential's estimates call for a 27% increase in net new revenue-generating units in the quarter. Styponias has a neutral weight rating on the company with a $21 price target, and either she, a member of her team or a member of her family owns stock in the company.

Time Warner's networks division, which houses

CNN

and other cable properties, should benefit from a fairly strong advertising market, while the film division, despite a so-so quarter at the box office, is likely to see some growth in the home video department driven by titles like

Harry Potter and The Goblet of Fire

and last summer's surprise comedy hit

Wedding Crashers

.

After having turned back a loud but ineffective shareholder revolt earlier this year, CEO Dick Parsons is focused on two key initiatives: a $20 billion share repurchase program and engineering a turnaround at AOL, which despite some progress continues to weigh on the company.

Though Internet players continue to reap rewards, AOL is still in the process of switching from a subscriber model to an ad-supported one. Prudential expects revenue at the online service this quarter to be down 8% year-over-year and believes subscriber revenue will drop some 13% on the heels of 2.8 million customer defections over the past year. The firm notes that losses will be mitigated by growth in ad revenue at the online giant, most of which is expected to come from paid search.

Looking at the stock performance of Time Warner peers so far this year, the picture does not brighten. Shares in Comcast are up 20%, while

Disney

(DIS) - Get Report

is up 16% and

News Corp.

(NWS) - Get Report

shares are up 11%.

Wall Street isn't jumping all over itself to reward Time Warner for its improving economics. On the basis of enterprise value divided by earnings before interest taxes, depreciation and amortization, Time Warner fetches a multiple of about 8.3, while Disney trades at 10.2 and News Corp. fetches 12.

Time Warner is also trying to close the book on its joint purchase of Adelphia, which faces a July 31 deadline. Opposition to a settlement plan that would see the bankrupt cable company sold to Time Warner and

Comcast

(CMCSK)

has surfaced recently, with one group of debt noteholders unhappy with current terms, according to a recent

Wall Street Journal

report. The parties signed a contract that would value Adelphia's holdings at $16.9 billion, but it needs the approval of a bankruptcy court.

It has also been reported recently that the company is in negotiations to sell baseball's Atlanta Braves and possibly other noncore assets to John Malone's

Liberty Media

(L) - Get Report

, which holds a $3 billion stake in the company. Liberty management has indicated recently that it would like to reduce its Time Warner stake, in a tax-efficient way.

Time Warner shares closed Monday down 6 cents at $17.34.