Time Warner Inc.'s second-quarter net income increased 14 percent as the media giant recorded its fastest revenue growth in nearly four years. But its stock fell because of concerns about the economy and a conservative profit outlook despite the blowout success of the final "Harry Potter" movie.
The results beat analysts' forecasts and were bolstered by improved advertising sales. Still, ad revenue growth wasn't a blowout. Despite adding NCAA college basketball playoff games to its Turner networks in a new deal with CBS Corp., ad revenue overall rose just 8 percent. That's roughly in line with what CBS reported Tuesday when stripping out one-time factors.
Time Warner tweaked its profit outlook only slightly higher even after "Harry Potter and the Deathly Hallows: Part II" sold more than $1 billion in tickets worldwide since its July 13 release.
The stock fell 43 cents, or 1.3 percent, to close at $33.57 Wednesday.
"We can't expect the advertising sales growth rate to accelerate any further at this point given that the economy has softened a bit," said Benchmark analyst Frederick Moran.
Standard & Poor's equity analyst Tuna Amobi said he thought the sell-off of stock was overdone and that investments in programming, such as for "The Big Bang Theory" to air on TBS in the fall, would pay off in the second half of the year.
Time Warner said Wednesday that net income for the three months that ended in June grew to $638 million, or 59 cents per share, from $562 million, or 49 cents per share, a year earlier. Excluding special items, earnings were 60 cents per share, above the 55 cents per share that analysts polled by FactSet had expected.
Revenue grew 10 percent to $7.03 billion from $6.38 billion. Analysts expected lower revenue of $6.81 billion. Time Warner said it was the fastest revenue growth since the third quarter of 2007 _ back when it still owned AOL and Time Warner Cable, which are now separate companies. In that quarter, revenue grew 9 percent.
Time Warner said adjusted earnings for the year should grow by "at least low teens" percentages from $2.41 per share last year. That's better than the "low teens" it predicted earlier. But analysts had expected earnings to grow by 14.5 percent this year to $2.76 per share.
In the most recent quarter, video game sales drove revenue growth in the company's Warner Bros. filmed entertainment business. Home video sales of last summer's "Harry Potter" flick and a strong showing in theaters by "The Hangover Part II" helped boost revenue by 13 percent to $2.8 billion. The most recent "Harry Potter" movie was released after the quarter ended.
Time Warner's networks business, which includes HBO, CNN and the Cartoon Network, saw revenue growth of 9 percent to $3.5 billion. The company credited higher payments by cable and satellite companies to carry the channels, improved advertising sales related to sports programming and higher sales of HBO programming such as "True Blood."
Publishing revenue at Time Inc. grew 3 percent to $946 million as ad revenue increased 1 percent.
One big disappointment in the quarter was the performance of "Green Lantern," a superhero flick from Warner Bros.' DC Comics unit. It brought in just $154 million at the box office worldwide since its June 17 release, despite costing an estimated $200 million to make and likely tens of millions of dollars more to market.
CEO Jeffrey Bewkes said the movie did not live up to expectations, prompting the company to reconsider whether to continue with the franchise even though the end of the movie strongly hinted at a sequel involving good-guy-turns-bad Sinestro.
Still, Bewkes said Warner Bros.' strategy will continue to rely on DC Comics for blockbusters, especially with the "Harry Potter" franchise winding down. He pointed to a new Batman film, "The Dark Knight Rises," next year and a new Superman film in 2013.
"We think DC is going to be a major contributor of franchises for Warner," he said.
The company also said that starting this fall, it will ramp up its participation in the UltraViolet system, where consumers who purchase home movies will get digital copies stored on distant computer servers known as the cloud.
Nakashima reported from Los Angeles.