Fueled by advertising growth for its cable channels and magazines,
reported third-quarter operating profits today that well exceeded Wall Street's expectations.
The nation's largest media and entertainment company said its earnings excluding one-time gains totaled 8 cents a diluted share. Analysts polled
by First Call/Thomson Financial
had been expecting an average of 4 cents a share.
Market reaction was muted. The company's stock was down 5/16 in midday trading at 63.
Time Warner said its net income, including nearly $500 million in one-time gains from the sale of cable systems, jumped to $360 million, or 27 cents a diluted share, reversing a loss of $37 million, or 3 cents a share, in the 1998 third quarter.
The company's operating cash flow rose 49%, to $1.61 billion from $1.08 billion a year earlier. Because Time Warner carries a heavy debt load exceeding $15 billion, Wall Street tends to focus on its cash flow -- earnings before taxes, interest and amortization -- to judge the underlying health of the company's operations.
Revenues for the third quarter rose 2%, to $6.72 billion from $6.59 billion. The results reflect the consolidation of
Time Warner Entertainment
into Time Warner in August.
"I am pleased again with the record quarterly results," Gerald Levin, chairman and CEO, said in a statement.
Chris Dixon, analyst for
, said the results were impressive across most sectors.
"Music was a little bit weaker than the Street had been looking for," Dixon said, citing market pressure from
. "Cable television continues to be driven by the rollout of a variety of new services" like digital TV. Dixon rates the stock a buy. PaineWebber hasn't done recent underwriting for Time Warner.
Cash flow at the company's cable networks rose 21%, to $328 million, in the quarter. At the
publishing division, cash flow rose 15%, to $129 million. But it fell 23% at the
Warner Music Group
, to $76 million, and 2%, to $228 million, at its movie division.
Time Warner's cable systems division saw its cash flow more than double, to $894 million, but that reflected $477 million in one-time pretax gains from the sale or exchange of cable systems.
network, meanwhile, saw its losses increase to $24 million from $17 million a year earlier.