Goldman Reiterates Buy On Time Warner, Pleased With HBO And Hulu News

Time Warner Inc TWX reported robust 2Q16 results, with the EPS beating expectations. The company also raised its FY16 EPS guidance.

Goldman Sachs’ Drew Borst reiterated a Buy rating on the company, while raising the price target from $87 to $89.

Beat And Raise

Time Warner reported its 2Q16 EPS at $1.29, ahead of the estimate and the consensus, with half the beat being driven by better-than-anticipated operating income at HBO and Warner Bros. and the other half by below-the-line items, including tax.

The company also raised its EPS guidance for 2016 from $5.35 to $5.45.

HBO

“We continue to believe that TWX will benefit from a favorable content cycle at Warner Bros., and HBO’s OTT initiatives and improving rates for HBO on approaching renewals,” Borst mentioned.

Related Link: Viacom Follows Times Warner, Impresses Investors With Q3 Report

HBO helped the 2Q beat with better-than-expected subscriber revenue growth of 6 percent, largely from higher HBO Now subscribers.

Borst expects HBO’s subscriber revenue growth to continue through the year-end, driven by new content.

Hulu

The analyst believes Time Warner’s 10 percent investment in Hulu boosts the latter’s efforts to compete against larger OTT competitors.

“Ensuring competitive balance in the OTT space should be a strategic imperative for all media incumbents, including TWX,” Borst stated.

In addition, Turner is expected to get broader network carriage through Hulu’s upcoming virtual MVPD service. Borst believes Turner is well positioned to weather the digital transition.

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