Why Time Warner (TWX) Stock Is Down Today

NEW YORK (TheStreet) -- Time Warner Inc (TWX) shares are down 0.9% to $64.24 on low volume Tuesday.

The drop follows the news that Time Inc. -- distributor of Time Magazine -- plans to raise $1.4 billion in debt in anticipation of its upcoming spinoff from Time Warner.

Time Inc. plans  to use the funds to purchase its U.K. publishing business with any potential leftover funds going towards a cash dividend to be paid back to Time Warner.

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TheStreet Ratings team rates TIME WARNER INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate TIME WARNER INC (TWX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TWX's revenue growth has slightly outpaced the industry average of 4.0%. Since the same quarter one year prior, revenues slightly increased by 4.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.67, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.16, which illustrates the ability to avoid short-term cash problems.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • TIME WARNER INC's earnings per share declined by 7.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TIME WARNER INC increased its bottom line by earning $3.76 versus $3.00 in the prior year. This year, the market expects an improvement in earnings ($3.92 versus $3.76).
  • You can view the full analysis from the report here: TWX Ratings Report
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