(Reuters) ? Time Warner Inc posted better-than-expected quarterly profit on Wednesday, helped by its cable networks and the last installment of its Harry Potter movie franchise.
Time Warner -- which also reported a new share buyback authorization, a better-than-expected profit outlook and an increase in its quarterly dividend -- initially saw its stock rise almost 3 percent. The shares settled back, however, as macroeconomic concerns out of Europe erased early gains in the broad market.
The New York-based company, which owns CNN, Turner and Warner Bros, reported an increase in carriage fees at its cable networks, helping to drive cash flow growth like that of other media conglomerates that have reported so far. Walt Disney Co on Tuesday said its media networks unit was boosted by its cable business, and Viacom Inc last week also highlighted its strong cable performance.
"Time Warner's cranking along well; they have momentum in ratings and ad revenue and they continue to invest well in programming," said Miller Tabak analyst David Joyce.
Investors also expect Rupert Murdoch's News Corp, which is due to report later on Wednesday, to also post strong growth at its cable business. News Corp is seen as a better bet because it is still valued slightly lower than its rivals.
"We like News Corp; it has the fastest growth over the next 12 months and the lowest multiples," said Collins Stewart analyst Thomas Eagan.
The media conglomerates have aggressively bought back stock and in some cases have also raised dividends over the last 12 months as they bid to return value to shareholders in an uncertain economic environment.
Subscription fees at Time Warner cable networks, including HBO, rose 5 percent to $3.5 billion driven mainly by a 5 percent increase in carriage fees paid by cable and satellite distributors.
But cable network advertising was up just 2 percent, with growth benefiting from international operations.
Chief Financial Officer John Martin said in the current quarter the networks' pricing for advertising has held up but volumes have softened in a few areas, including global packaged goods.
Advertising revenue at its Time Inc magazine publishing business was flat during the quarter, but total revenue was down 1 percent to $1 billion.
Warner Bros revenues rose 7 percent to $3.9 billion, due mainly to stronger home entertainment, video games and new subscription video-on-demand deals with companies like Netflix Inc and others.
"The most important thing they said for us was that they would be able to maintain margin growth at the cable networks even as they increase investment in programming," said Collins Stewart's Eagan.
Net profit rose to $773 million, or 76 cents a share, in the fourth quarter compared with $769 million, or 68 cents a share, a year before.
On an adjusted basis, earnings were 94 cents a share, ahead of average analysts' forecast of 87 cents a share, according to Thomson Reuters I/B/E/S.
Revenue rose 5 percent to $8.2 billion.
The New York-based company forecast full-year percentage growth rate in adjusted earnings per share to be in the low double digits from a base of $2.89 in 2011. At the low end, that would translate to about $3.18 a share, which would be ahead of analysts' average forecast of $3.16.
Time Warner also raised its quarterly cash dividend by 11 percent to 26 cents and announced a new $4 billion stock repurchase authorization by its board.
Time Warner shares were up 24 cents to $38.34, after reaching as high as $39.24 earlier, while Viacom added 61 cents to $49.41. Disney added 59 cents to $41.57 while News Corp rose 3 cents to $19.53 in afternoon trading.
(Reporting By Yinka Adegoke, editing by Dave Zimmerman, Derek Caney and Gerald E. McCormick)
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