Goldman Raises Time Warner's Target To $87, Lowers Warner Bros. And Turner Estimates
Time Warner Inc (NYSE: TWX) delivered a broad-based EPS beat for 1Q16. Goldman Sachs’ Drew Borst reiterated a Buy rating for the company, while raising the price target from $81 to $87. The analyst mentioned that the quarterly results reinforces Time Warner’s growth story.
Time Warner reported its 1Q16 EPS at $1.49, significantly ahead of the GS estimate of $1.30 and the consensus expectation of $1.29. The EPS beat was broad-based, with operating income ahead of expectations across all division, particularly in Warner Bros. and Turner, analyst Drew Borst said.
What The Results Mean
Despite the beat, Time Warner reiterated its 2016 guide of $5.30-$5.40, including a $0.10 forex headwind. “In our view, TWX has a history of conservatism with its guidance, particularly early in the year due to the volatility of film and foreign currency,” Borst noted. He added that a part of the 1Q beat was timing related, driven by international TV licensing deals.
Turner’s affiliate fees grew 11 percent y/y, including 15 percent growth in the US. The analyst expressed optimism regarding Time Warner’s ability to generate low-teens US fee growth in 2016-2017.
Turner ads rose 5 percent y/y, including MSD growth in the US. The company projected 2Q ad growth of MSD-HSD, which reflects “continued scatter strength and ratings tailwinds at CNN from political,” the Goldman Sachs report noted.
The EPS estimate for 2016 remains unchanged at $5.39. The EPS estimates for 2017 and 2018 have been lowered by 2 percent on average to $6.19 and $7.13, respectively, mostly to reflect higher costs at Turner.
- Turner: The operating profit estimate for 2016 has been reduced by 1 percent to $4.4 bn, reflecting higher programming cost and SG&A.
- HBO: The operating profit estimate for 2016 is largely unchanged at $2.03 bn.
- Warner Bros.: The EBIT estimate for 2016 has been lowered by 2 percent to $1.60 bn, adjusting the box office outlook.
Time Warner continues to be on Goldman Sachs’ Americas Conviction Buy List.
Latest Ratings for TWX
|Dec 2016||Brean Capital||Downgrades||Buy||Hold|
|Nov 2016||Moffett Nathanson||Upgrades||Neutral||Buy|
|Nov 2016||Credit Suisse||Upgrades||Neutral||Outperform|
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