Why Investors Feel Safe With A Media Company Named Time Warner

Time Warner's creating value

Time Warner (TWX) is another media conglomerate taking the buyback route to appease shareholders. Time Warner's revenue comes from different segments -- Publishing, Film & Distributions, and Networks. The company is among the leaders in the global media and entertainment industry.

Just like Disney, Time Warner had also announced a stock repurchase plan at the beginning of this year. The total share repurchase program was worth $4 billion and the company has already executed repurchases worth $1.8 billion (32 million shares). The company has also paid $500 million in terms of dividends to its shareholders.

The company's recently released second-quarter earnings were pretty robust. It recorded 10% growth in revenue to $7.34 billion from the year-ago quarter. A segment-wise break up of Time Warner's business is given below for better clarity.

Network segment: This includes TNT, TBS, CW, Cartoon Network, CNN, and HBO. The Network segment recorded growth of 7% to $3.84 billion in the quarter. The segment mainly comprises of subscription revenue (4% growth), advertisement revenue (11% growth), and content revenue (5% growth).

Growth in subscription revenue was mainly due to expansion in the international market and revised rates in the domestic market. Subscription revenue increased mainly due to the NBA playoff and the timing of the NCAA tournament. Ratings of CNN increased by 70% as it won market share from competitors' news networks.

Film & Entertainment: This witnessed a growth of 13%, driven by the success of Man of Steel, The Great Gatsby, and The Hangover Part III. Overseas television syndication increased and Time Warner also recorded a rise in video-on-demand subscription.

Publishing: The Publishing business is shrinking in terms of revenue and operating income. It saw a decline in revenue of 3% due to fall in subscription revenue (7%) and advertising revenue (5%).

Thus, Time Warner is seeing growth in its important segments. In addition, the company's decision to spin-off Time Inc. will further help it concentrate on its growth segments and deliver better value to shareholders.

Time Warner is also cheaper than Disney as far as trailing P/E is concerned. It trades at 17.5 times trailing earnings while the forward P/E ratio comes down to 15x. Analysts expect annual earnings growth of 12.7% for the next five years. Time Warner is making some good moves to increase value and investors should definitely consider it for their portfolio.