Time Warner earnings soar with ‘Suicide Squad’ and ‘Sully’

Strong performance from the movies “Suicide Squad� and “Sully� as well as CNN’s coverage of the contentious presidential election propelled Time Warner Inc.’s third-quarter earnings beyond Wall Street’s estimates.

The better-than-expected results came less than two weeks after phone giant AT&T announced that it was buying Time Warner for $85.4 billion — a 35% premium over Time Warner’s trading price before news of the deal.

“We believe that combining with AT&T is the natural next step in the evolution of our business,� Time Warner Chairman and Chief Executive Jeff Bewkes told analysts during a Wednesday morning conference call.

Bewkes said he expected the AT&T deal would close by the end of 2017, “if not sooner,� pushing back on speculation that the massive merger could get hung up in Washington.

For the July-September quarter, Time Warner reported earnings of $1.83 a share on revenue of $7.2 billion. Analysts polled by Thomson Reuters had predicted earnings of $1.37 a share on revenue of $6.98 billion. (In the third quarter of 2015, Time Warner earned $1.27 a share on revenue of $6.6 billion.)

Net income for the third-quarter of 2016 reached nearly $1.5 billion.

The Warner Bros. film and TV studio in Burbank was back in the company’s good graces, lifted by DC Comics superheroes and Clint Eastwood’s film about the real-life pilot hero “Sully� Sullenberger. Revenue at the Burbank studio increased 7% to $3.4 billion. Operating income was up 11% to $428 million.

“Warner had a terrific quarter,� Bewkes said.

The results were fueled by the August release of “Suicide Squad,� which generated more than $325 million domestically and nearly $750 million worldwide. Two other third-quarter films, “The Legend of Tarzan� and “Sully,� the latter starring Tom Hanks as the steely pilot who guided his jetliner for a landing in the Hudson River, both earned more than $120 million in U.S. and Canada.

“Sully� represented the sixth Warner Bros. film this year that surpassed $100 million in ticket sales. The current quarter should be even stronger as Warner Bros. is banking on J.K. Rowling’s “Fantastic Beasts and Where to Find Them,� part of the Harry Potter universe.

“We think it will be a global hit, not just at the box office but in consumer products and across all platforms,� Bewkes said.

Time Warner’s cable programming unit, Turner, turned in strong numbers due to the strength of CNN and the other channels, TBS, TNT and Cartoon Network’s Adult Swim. Revenue rose 9% to $2.6 billion because of higher subscription fees and CNN’s strong advertising sales. Turner’s operating income increased 8% to $1.2 billion.

HBO, the company’s smallest unit, saw revenue climb 4% to $1.4 billion because of higher subscription revenues. Operating income increased 2% to $530 million.

AT&T’s proposed cash and stock purchase of Time Warner would make the phone company the nation’s largest media company, surpassing the Walt Disney Co. and Comcast Corp., which owns NBCUniversal.

Analysts on the earnings call were interested in whether the massive deal would provoke a review by the Federal Communications Commission, which is expected to be a more thorny process than a review by other federal agencies. The FCC reviews license transfers from one company to another.

Time Warner’s corporate attorney explained that none of Time Warner’s licenses, including an independent TV station in Atlanta, were central to the company’s business, so the company was “looking at� whether the FCC would be involved. AT&T and Time Warner are hoping to sidestep an FCC review. However, the massive deal also will be reviewed by the U.S. Justice Department.

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