A little magic from Harry Potter lifted Time Warner's third-quarter earnings sharply on Wednesday, as the final movie about the boy wizard's adventures led to record results at the media conglomerate's film division.
"Harry Potter and the Deathly Hallows: Part 2" has made $1.3 billion in ticket revenues worldwide since its July debut, and the home video release on Nov. 11 will likely be one of the biggest of the year.
Combined with Time Warner's syndication of the TV show "Big Bang Theory," the movie drove Warner Bros. to its strongest quarter ever, said John Martin, Time Warner's finance chief, in a conference call. Besides Warner Bros., Time Warner owns HBO, CNN, Time and People magazines and a slew of other media properties.
Although the results surpassed Wall Street's expectations, investors sent Time Warner's stock down more than 2 percent Wednesday amid a broader market uptick. Equity analyst Tuna Amobi with S&P Capital IQ said investors may be concerned that it was Time Warner's film division, and not its cable networks business, that carried the quarter.
"Any time you have the film studio driving results, it's not a comfortable trend on Wall Street," he said. "It's a volatile business and it can just as much go south the next quarter."
The success of the "Harry Potter" blockbuster may have already been priced into Time Warner's stock price. That said, Amobi called the stock's retreat a buying opportunity and said investors might be overlooking what's expected to be an "extremely strong" fourth quarter.
Time Warner Inc. posted net income of $822 million, or 78 cents per share in the July-September period, up 57 percent from $522 million, or 46 cents per share, a year earlier. Adjusted earnings were 79 cents per share.
Revenue rose 11 percent to $7.07 billion from $6.38 billion. Time Warner said this was the highest quarterly growth rate since the third quarter of 2007.
Analysts had expected slightly lower adjusted earnings of 75 cents per share on revenue of $6.97 billion, according to FactSet.
CEO Jeff Bewkes called the quarter "terrific" and said the results show that the company's focus on investing in "great content" and ways to deliver it is paying off. The company lifted its guidance for the full year, though it did not give specific numbers.
Time Warner, which is based in New York, said it expects its full-year adjusted earnings to rise by a percentage in the high-teens from $2.41 per share in 2010. In August, the company said adjusted earnings for the year should grow by "at least low teens."
Analysts are predicting $2.78 a share, an increase of 15 percent.
Time Warner's filmed entertainment segment, Warner Bros., accounted for $3.3 billion of the quarter's revenue _ an increase of 19 percent thanks to "Harry Potter" and higher TV license fees.
Time Warner's networks segment, which includes HBO, CNN, TBS and other channels, saw its revenue grew 7 percent to $3.21 billion, helped by both higher subscription and higher advertising revenue.
Shows that include "Big Bang Theory," "Mike & Molly" and "Two and a Half Men" did well, the company said, along with the new series "2 Broke Girls" and "Person of Interest."
Time Inc., the publishing segment that includes magazines from People to Real Simple to Fortune, saw its revenue fall 1 percent to $889 million due to lower subscription and ad revenue.
Though "Deathly Hallows" was the final movie in the Harry Potter series, the company plans to make more money from the boy wizard and friends.
"While this was the last film in the series, the Harry Potter franchise will endure in a variety of ways for a long time," Bewkes said. As just one example, next spring we'll opening the Making of Harry Potter attraction at our studio outside London coinciding with the 2012 London Olympics."
Time Warner's shares slid 83 cents, or 2.5 percent, to $33.01 in afternoon trading. The stock is still up about 2.6 percent year-to-date, compared with a 2.3 percent decline for the Standard & Poor's 500 index over the same period.