TWX Time Warner Inc. New

By Lisa Beilfuss 

Time Warner Inc. offered an upbeat forecast for the year after topping earnings expectations in its fourth quarter, thanks to lower costs and continued gains in its HBO segment.

The media giant also raised its quarterly dividend 15% to $1.61 a share and said its board approved $5 billion in additional share repurchases.

Still, shares declined 5.9% in early trading as revenue fell short of analysts' expectations. "There is a bit of contagion as far as the market reacting negatively on any media earnings noise," said Matt Harrigan, analyst at Wunderlich Securities.

Investors punished shares of Walt Disney Co. and Viacom Inc. after those companies reported earnings on Tuesday. Their shares declined 5.3% and 3.4%, respectively, in morning trading on Wednesday.

Time Warner, the owner of Warner Bros. film studio and cable channels HBO, TNT and CNN, has been grappling with cable TV subscriber declines and the rise of online streaming. The company has said it would invest more in digital platforms and consider holding back more of its television shows for longer on its own platforms before selling them to streaming services like Netflix Inc., and it has engaged in talks to buy a stake of Hulu, another streaming service.

In its latest quarter, Time Warner said it grew HBO subscribers, both through traditional networks as well as through its stand-alone streaming service HBO Now. Subscription revenue in the segment rose 3.2% from a year earlier, but inched lower from the third quarter. Total HBO revenue increased 5.5% to $1.41 billion as content revenue jumped.

Mr. Harrigan said HBO needs to show that it can monetize more nonpaying customers, adding that investors haven't had as much patience with HBO Now profitability as they have had with competitors like Netflix.

Strength in HBO--which includes programs like Game of Thrones and True Detective--helped offset weakness in the Time Warner's film segment. HBO revenue rose 5.5% to $1.41 billion, while Warner Bros. revenue tumbled a worse-than-expected 15% amid a dearth of blockbusters. In the Turner business, increased advertising and the airing of Major League Baseball playoffs helped revenue edge 2.1% higher.

Overall revenue declined 5.9% from a year earlier, due to the effect of a stronger dollar coupled with the Warner Bros. weakness. Lower expenses, though, countered the effect of lower revenue and pushed earnings up 19% from the year-ago quarter.

Restructuring costs fell sharply from a year earlier and the company managed to push overhead costs lower by 16%. In the year-ago period, Time Warner booked charges associated with its marketing and development of HBO Now in addition to restructuring expenses stemming from the closure of CNN Latino and the separation of Time Inc., among other items.

In all for the quarter, Time Warner reported profit of $857 million, or $1.06 a share, up from $718 million, or 84 cents, a year earlier. Revenue slid 5.9% to $7.08 billion. Analysts surveyed by Thomson Reuters had projected $1.01 in adjusted profit per share on $7.53 billion in revenue.

Mr. Harrigan from Wunderlich attributed the company's earnings beat to a low tax rate. In the latest quarter, Time Warner's income-tax provision was $280 million, versus $381 million a year earlier on operating profit that was roughly flat.

For the year, Time Warner said it expects to earn an adjusted $5.30 to $5.40 a share this year, above the $5.26 analysts have projected and up from its earlier prediction of $5.25 a share.

Shares in the company, down 9.4% over the past three months through Tuesday's close, declined 4.5% in premarket trading.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

February 10, 2016 09:54 ET (14:54 GMT)

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