Why Time Warner (TWX) Stock Is Declining Today

NEW YORK (TheStreet) -- Shares of Time Warner (TWX) are plunging, down -12.74% to $74.34 in pre-market trading, after Rupert Murdoch's Twenty-First Century Fox (FOXA) yesterday dropped its $80 billion offer to buy the company.

The surprise announcement appears to have cut short what many investors viewed as an inevitable battle over a deal that would have would have joined two of Hollywood's biggest studios and TV networks, Reuters reports.

Still, some investors wondered whether the move could be a shrewd effort to drive down the stock, prompting Murdoch to re-enter the fray later on, Reuters said.

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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 solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

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

  • Powered by its strong earnings growth of 79.74% and other important driving factors, this stock has surged by 33.34% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TWX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • TIME WARNER INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TIME WARNER INC increased its bottom line by earning $3.77 versus $3.00 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.77).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Media industry. The net income increased by 71.3% when compared to the same quarter one year prior, rising from $754.00 million to $1,292.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.9%. Since the same quarter one year prior, revenues slightly increased by 8.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.68, 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 1.32, which illustrates the ability to avoid short-term cash problems.
  • You can view the full analysis from the report here: TWX Ratings Report

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