Time Warner ( TWX) reported fourth-quarter earnings in line with Wall Street's expectations on Wednesday, but its shares lost ground as traders found a lack of positive surprises from the media giant.

The company reported earnings of $1.75 billion, or 44 cents a share, for the quarter. That marked a 35% increase from the $1.3 billion, or 28 cents a share, it recorded for the year-ago period. A number of one-time items, like the sale of its AOL dial-up services in Europe and revenue gains from its newly acquired cable properties, boosted the results.

Excluding special items, earnings were 23 cents a share, down from 24 cents a year ago, but in line with Wall Street's consensus estimate.

The company guidance for 2007 earnings of $1 a share was also in line with expectations, but Time Warner shares recently were down 21 cents, or 1%, to $21.83.

Miller Tabak analyst David Joyce says the market's reaction to the results reflected a "sell on the news" reaction from traders that were betting on an upside surprise from Time Warner.

"People are looking at some short-term blips here and there, but I think this just gives us a good entry-point for investors with the longer-term view," says Joyce, who holds a buy rating on Time Warner shares with a $27 price target.

He's also positive on shares of the company's cable unit, which is set to be spun off.

"I like the prospects for cable," says Joyce. "There's a lot of margin expansion to come from integration and from starting to introduce the phone product in the Adelphia system, so we like their outlook there."

The cable division shined in Time Warner's fourth quarter. Operating income at Time Warner Cable jumped 26% to $633 million and revenue rose 58% to $3.65 billion, driven by the acquisition of Adelphia assets and the success of its so-called Triple-Play offering that combines digital Internet, phone and cable TV services.

It added 675,000 revenue generating units, or RGUs, in the fourth quarter of 2006. At the end of 2006, 6.2 million customers subscribed to two or more primary products. Triple Play subscriptions totaled 1.5 million.

Time Warner Cable lost 23,000 basic video subscribers, hurt by losses in its newly acquired Dallas and Los Angeles systems. These losses were easily offset by the net addition of 246,000 digital video subscribers. Digital video subscribers totaled 7.3 million at the end of the quarter.

Residential high-speed data subscriber net additions reached 246,000 in the fourth quarter, bringing total residential high-speed data subscribers at the end of the quarter to 6.6 million.

Digital phone subscriber net additions were 211,000 in the fourth quarter. At the end of the quarter, digital phone subscribers totaled 1.9 million.

At Time Warner's closely watched Internet business, AOL, revenue dropped 8% from a year earlier to $1.9 billion. At year-end, the AOL service had 13.2 million U.S. access subscribers, a decline of 2 million from the prior quarter and 6.3 million from the year-ago quarter, reflecting subscriber losses due to its strategy of shifting from a subscriber-based business model to an ad-supported model.

Joyce says AOL's revenue held up better than he expected, given the transition, thanks to its "industry-leading" 49% growth in online advertising.

"They lost more dial-up subscribers than we expected, but there was better digital video ads than we expected," says Joyce.

On a conference call with analysts, Time Warner executives said the subscriber losses were expected and an increase in email page-views at AOL is a leading indicator of an upswing in overall usage on its system.

At its cable networks division, which includes HBO, Time Warner reported a 10% gain in revenue and a 12% jump in operating profits for the quarter.

Its filmed entertainment business posted a 15% revenue drop 15% for the quarter, and the division's operating profit fell 39% due to difficult comparisons to 2005.

And weakness continued at Time Warner's publishing division, where the company recently slashed 300 jobs at Time Inc., its magazine publishing business. Its quarterly revenue declined 1%, while its operating profit gained 3%.

On the conference call, Time Warner's president and chief operating officer, Jeff Bewkes, said he believes the publishing business is done with its restructuring.

"We expect all of our segments to increase earnings this year, including publishing," said Bewkes. "My belief is that the fortunes of publishing will begin to accelerate."

Bewkes was recently elected to Time Warner's board of directors, along with Motorola ( MOT) Chairman and Chief Executive Ed Zander.

Morningstar analyst Jonathan Schrader said in a recent report that the development is, "the final step, we believe, in Bewkes replacing Dick Parsons as Time Warner's chief executive officer, a move that will probably happen within the next 16 months."

Parsons' contract runs through May 2008. For his part, the Time Warner CEO announced on the conference call that the New York media giant has repurchased $16.4 billion worth of stock under a Carl Icahn-inspired $20 billion buyback plan at "an average price of just under $18 a share."

Time Warner said it expects to complete that repurchase program in the first half of 2007.