Time Warner Inc (NYSE: TWX) stock, the world’s third-largest media conglomerate, recently announced some significant developments that would serve as strong catalysts for its continued growth and profitability.
Time Warner stock has been consistent in delivering better-than-expected earnings over the past four quarters. In the second quarter alone, TWX stock posted adjusted earnings of $1.29 per share, which is higher than the $1.16 per share consensus estimate. The company’s revenue was $6.95 billion, which is slightly lower than the $7.05 billion expected by analysts. (Source: “Time Warner Reports Second-Quarter 2016 Results,” Time Warner Inc, August 3, 2016.)
The company’s investors are pleased with its robust financial performance. They remained bullish on TWX stock, which gained 17% year-to-date. The stock is expected to increase more over the coming quarters.
Time Warner’s Latest Deals Could Push TWX Stock Higher
The potential catalysts for Time Warner’s stock include Turner Broadcasting System, Inc.’s multi-year licensing agreements for the Star Wars movie collections with The Walt Disney Co (NYSE:DIS) Studios and 20th Century Fox; and its Warner Bros. International Television Distribution’s multi-year free television deal with Brazil’s Globo Comunicação e Participações S.A.
The Disney and 20th Century Fox agreements grant TNT and TBS the exclusive line on basic cable and companion ad-supported on-demand rights to Star Wars, one of the most successful movie franchises of all time. Time Warner’s Turner Broadcasting is the only company with the basic cable rights to all of the 11 Star Wars titles, including the record-breaking Star Wars: The Force Awakens and the highly-anticipated Rogue One: A Star Wars Story. (Source: “Turner Licenses Rights to Iconic Star Wars Film Collection,” Time Warner Inc, September 14, 2016.)
TNT and TBS are among the top five ad-supported cable networks in prime time among adults 18 to 49 years old. Time Warner’s five marque original programs launched this year, including Angie Tribeca, Animal Kingdom, Full Frontal, Wrecked, and The Detour, have already topped expectations. The availability of Stars Wars movies would further boost engagement with audiences and increase its revenue.
Turner is one of the best-performing business segments of Time Warner stock. In the second quarter, the segment’s revenue increased six percent to $3.0 billion and received 22 Primetime Emmy nominations. Its brands, including CNN, received 15 News & Documentary Emmy Awards nominations. It is the number-one news network among adults 18-49 in prime time. Adult Swim was the number-one ad-supported cable network among adults 18-34 while TNT and TBS ranked second and fifth in the second quarter of 2016.
Warner Bros.’ agreement with Globo includes free television broadcast rights to feature films such as American Sniper, Mad Max: Fury Road, and Batman vs. Superman: Dawn of Justice, among others. The deal also includes rights to television series such as Gotham, Supergirl, and The Flash. Brazil is important for Time Warner. The Warner Bros.’ deal with Globo allows it to reach 96 million people. (Source: “Warner Bros. International Television Distribution signs multi-year volume deal with Brazil’s Globo for free television rights to films and series,” Time Warner Inc, August 29, 2016.)
DC Comic Heroes Could Take TWX stock Higher
Aside from this deal, Warner Bros. is set to produce 65 series next year including 10 shows from the DC Comics universe. Time Warner chair and CEO Jeffrey Bewkes believes that Warner Bros. is still on track to achieve a record year, as it continues to take advantage of its intellectual property (IP) with a franchise-driven strategy.
Suicide Squad, the second movie released by Warner Bros. from the DC Comics universe raked in more than $720.0 million from global box office to date. The film’s production budget was $175.0 million. (Source: “Suicide Squad (2016),” The Numbers, last accessed September 21, 2016.)
On the other hand, the company’s Batman vs. Superman: Dawn of Justice collected more than $868.0 million from the global box office compared to its production budget of $250.0 million, according to data from The Numbers web site.
Based on the figures, Time Warner gained significantly from both films. It is expected to achieve more revenues from the 65 series that will be produced by Warner Bros. next year.
It is also interesting to note that Warner Bros. Pictures’ Sully, a film starring Tom Hanks and directed by Clint Eastwood, topped the box office for the second consecutive week. The film already collected $70.5 million in total revenues in the United States and Canada. Sully is a drama based on the true story of Captain Chesley Sullenberger, who amazingly landed a commercial plane in the Hudson River, saving the lives of 155 passengers in 2009.
The Bottom Line on TWX Stock
Time Warner is a great media and entertainment company with strong brands. Its management is committed to implementing its strategy to ensure that its brands, networks, and shows are available to consumers in different devices and platforms. The company is also positioning itself to develop new revenue streams for its leading brands.
Wall Street analysts are convinced that Time Warner stock will continue to deliver strong financial results and outperform the market. Eleven analysts have a “buy” rating while 15 of them recommended an “outperform” rating on TWX stock. Twelve analysts are advising investors to “hold” their position in the company.
The analysts forecasted that TWX stock could trade as high as $106.00 per share, which is an increase of more than 40% from its current trading price of $76 .02 per share. Their median price target is $89.00 per share, which is an upside of 18%.