Media giant Time Warner, a little more than a week after announcing a deal to sell itself to telecom titan AT&T for $85 billion, reported earnings and revenue for the third quarter that topped Wall Street’s expectations.
Time Warner also boosted its outlook for the full year.
Shares of Time Warner rose nearly 2% in premarket trading. But the stock, trading around $90 a share, is still well below the $107.50 per share that AT&T has offered for the company. Time Warner owns CNN.
The discrepancy between the stock price and what AT&T has proposed to pay is a sign investors fear regulators may not approve the deal.
Time Warner CEO Jeff Bewkes didn’t address those concerns in the company’s earnings announcement.
“Combining with AT&T is the natural next step in the evolution of our business and allows us to significantly accelerate our most important strategies,” Bewkes said. The company added that it still expects the deal to be done by the end of 2017.
Although regulators ultimately approved a deal between a cable operator and a media company when Comcast bought NBCUniversal from GE in 2011, there are concerns the Justice Department, the FCC and others may take a tougher look at AT&T and Time Warner.
Still, investors had reason to cheer Wednesday regardless of what ultimately happens with the AT&T deal. Time Warner reported sales of $7.2 billion for the quarter, up 9% from a year ago and ahead of analysts’ forecasts of $7 billion.
The company’s adjusted operating profit rose 12% to $2.1 billion, or $1.83 a share. Wall Street was expecting earnings of $1.37 a share.
Sales at the company’s Turner unit rose 9%, led largely by higher subscription revenue for the company’s cable channels, which include TBS, TNT and the Cartoon Network as well as CNN. Ad revenue also rose at CNN because of high interest in the U.S. presidential election.
Time Warner said that expenses at its cable networks rose 5% from a year ago, mainly because of programming costs related to covering the election. But those higher costs were more than offset by the increased revenue.
Time Warner’s movie and TV studios also had a solid quarter, with revenue up 7% and profit rising 11%.
The box office success of “Suicide Squad,” which features DC Comics villains The Joker and Harley Quinn, was the main driver behind the strength at the Warner Bros. studio.
Time Warner’s HBO unit posted sluggish growth, though, with sales up 4% from last year and operating profit rising only 2%.
