Hit movies and strong cable TV advertising boosted Time Warner Inc's second-quarter profit, and the media company raised its profit forecast for the year and said the spinoff of its Time Inc magazine division would be early next year.
Chief Executive Jeff Bewkes said on a conference call with analysts that the spin-off the publisher of People, Sports Illustrated and Time magazines as a publicly traded company would occur in early 2014 instead of by the end of this year to give it more time to develop its strategy.
Joe Ripp, a former Time Inc and AOL executive, is due to become CEO of the unit in September. "Rather than rush to complete the transaction this year, we have decided that it is prudent to give Joe some time to further refine Time Inc's strategic direction," Bewkes said.
The company's strong second quarter was driven by successful films including "The Great Gatsby" and "Man of Steel" which increased revenue in its film unit and an 11 percent rise in cable TV advertising thanks to popular basketball games.
Time Warner's net income rose in the period to $771 million, or 81 cents per share, from $412 million, or 42 cents a share, a year earlier. Excluding a $12 million charge for the extinguishment of debt, earnings of 83 cents a share beat analysts' estimates of 76 cents.
It raised its forecast for full-year earnings growth to mid-teens percentage, up from low double-digits. The analysts' average estimate calls for a 14 percent rise, according to Thomson Reuters I/B/E/S.
Time Warner shares were up $1.28 or 2 percent after it released its second-quarter results.
Comeback for CNN
Time Warner executives highlighted the turnaround of its CNN news channel under the direction of former NBC Universal CEO Jeff Zucker, who took over the cable network in January. Bewkes said CNN's ratings were up nearly 70 percent in its key demographic of 25-54 and the network took market share from its rivals in the quarter. CNN is making "real progress" and has the potential to make more money, Bewkes said.
"We think everything at CNN is on the uptick. Really the quality of what it is doing and also both the ad rates and the affiliate rates," Bewkes said.
Bewkes, who has acknowledged CNN's ratings stumbles on calls in the past, mentioned the momentum of morning show "New Day" and Anthony Bourdain's new program.
Another second-quarter strength was advertising. The gain of $129 million, or 11 percent, in advertising at the cable network unit, which houses channels such as TNT, TBS and CNN, surprised analysts. Sterne Agee's Vasily Karasyov and Wunderlich Securities' Matthew Harrigan both said they expected a 9 percent increase.
Cable advertising at Time Warner also outpaced gains by rivals. It rose 6 percent at Viacom Inc, 10 percent at Discovery Communications Inc and 4 percent at Twenty-First Century Fox Inc in the second quarter.
Time Warner said pricing for ads had increased and demand was strong during the NBA playoffs on TNT, and the later part of NCAA basketball tournament also occurred in the quarter.
"Advertising, which has been a problem area for the company, seemed strong in the quarter," said Gabelli & Co analyst Brett Harriss.
The film unit, which also makes television shows, said it led all competing studios, with orders of 18 returning series and 13 new ones for the upcoming primetime TV schedule.
Revenue for Time Warner, which also owns premium cable channel HBO, rose more than 10 percent to $7.44 billion in the second quarter. Analysts expected $7.11 billion, according to Thomson Reuters I/B/E/S.
Finance chief John Martin said the company is still figuring out Time Inc's capital structure as an independent company including how much debt it might have and its dividend policy.