Time Warner outlook lifted by cable division

Time Warner on Wednesday raised its profit outlook for the year due to the strength of its US cable business and gains in online advertising market share by its AOL internet division.

The world’s biggest media company raised its guidance for earnings per share to $1.05 per share, from $1.

Time Warner Cable, which is now traded as a separate company but is still mostly owned by Time Warner, was the main driver of higher revenues reported for the first quarter of the year.

Cable revenue rose 61 per cent, while operating profit before depreciation and amortisation rose 54 per cent as growth in recently bought cable systems lifted the results. In total, revenue for Time Warner was up 9.2 per cent to $11.2bn.

“Time Warner Cable expectations were low in the wake of well-publicised integration concerns about Los Angeles,” said Craig Moffett, analyst at Sanford Bernstein. “That bodes well for investor response.”

Part of the increase in anticipated earnings reflects gains from asset sales such as AOL’s internet access business in Germany and some sales of cable systems.

The company’s shares rose 52 cents, or 2.5 per cent, to $21.11 in morning trading in New York.

AOL continued its transition from an internet connection service to one focused on online advertising and reported a 27 per cent gain in profit in spite of lower revenues as the expenses for marketing its dial-up connections fell.

AOL is now giving away many services such as e-mail for free in the hope of attracting more online traffic and advertisng dollars. During the quarter, AOL revenues fell 25 per cent to $1.46bn as subscription revenues plunged 43 per cent. Onine advertising revenues were up 35 per cent, excluding a one-off benefit.

Dick Parsons, chairman and chief executive of Time Warner, said he was “very pleased” with the progress AOL had made with its new strategy. There is a lot riding on the strategy for AOL, which is aimed at turning the internet division into a growth division for Time Warner.

At its film division, which includes Warner Brothers, operating profit fell 34 per cent to $243m, due to weaker sales of the DVDs of Happy Feet, The Departed and Blood Diamond, compared with sales of Harry Potter and the Goblet of Fire and Wedding Crashers last year.

Time Inc, the magazine publishing division, saw operating income drop 49 per cent to $38m because of restructuring costs.