Time Warner just cut its outlook and now the stock is getting whacked
Time Warner just cut its outlook for next year and now the stock is getting whacked.
On its third quarter earnings conference call, the company said it now sees 2016 adjusted earnings per share coming in closer to $5.25 per share. Expectations were 2016 earnings to come in closer to $5.60 per share, according to Bloomberg.
In cutting this outlook the company cited a likely increase in investments, which it said could run into the "hundreds of millions," though an exact number wasn't given.
For 2015, the company sees earnings coming in $4.60-$4.70 per share, reaffirming its previous outlook.
Following this news, the stock took a quick ugly leg lower, falling as much as 7%.
Earlier on Wednesday, Time Warner reported earnings and revenue in the third quarter that beat expectations.
Adjusted earnings per share hit $1.25 in the quarter, better than the $1.09 that was expected by Wall Street, while revenue hit $6.56 billion, better than the $6.51 billion that was expected.
This week, earnings and news from the market's biggest content companies are in focus after this summer saw a sharp sell off in media stocks including Time Warner, Disney, and Viacom.
The core worries from investors are two-fold.
Primarily, investors seemed worried in the summer about a decline in cable subscribers, stoking fears about not only a decline in potential subscription revenue but a potential decline in advertising revenue as the number of people watching TV falls.
The other worry, which is being more directly played out in Time Warner's news on Tuesday, is that an increase in investments will be required as competition from Netflix and other players increases, forcing companies like Time Warner to not only spend more on content but spend more on ways to disseminate it.
The company's new HBO Now offering, which allows non-HBO subscribers to sign up for HBO and watch it through an Apple TV, would be an example of these new investments.
More to come ...