Needham & Company Maintains a 'Hold' on Time Warner (TWX); 3Q11 ROIC Analysis and FY12 Outlook
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Rating Summary:
14 Buy, 24 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
14 Buy, 24 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Needham & Company maintains a 'Hold' on Time Warner (NYSE: TWX).
Needham analyst said, "There is currently a 93% correlation between FY12E ROIC and media industry share prices. Wall St closely follows the income statement, ie, the numerator. In this quarterly report, we analyze the denominator - trends in assets employed, capital intensity, and free cash flow. Highlights from TWX’s capital allocation in the 9/30/11 quarter included: 1. Return of Capital. If shares plus debt are shrinking, this implies less capital is being used in the business, which implies rising ROICs. Average Shares Outstanding fell by 21mm (about $700mm), while Net Debt rose by about $300mm in 3Q11. Therefore, net capital returned to capital markets was about $400mm. 2. CapX trends are a lead-indicator of future ROIC growth. TWX’s CapX fell 6% to $174mm in 3Q11- a good sign. However, CapX for the first 9 months of FY11 is up 52% y/y to $511mm, suggesting ROIC weakness. 3. TV & Film. TWX spends 8x more on buying and making TV and film programming than it does on capital spending. TWX’s TV and Film inventory totaled $6.8B at 9/30/11, up 8% Q/Q in 3Q11. 4. Total Assets rose by $262mm (1%) to $66.9B at 9/30/11. Net assets employed rose by $537mm while cash balances fell by $275mm. 5. Cash From Operations posted higher results in 3Q11, up 50% y/y to $1.278B. 6. EBITDA rose 18% y/y to $1.872B in 3Q11 and is up 5% year to date."
For an analyst ratings summary and ratings history on Time Warner click here. For more ratings news on Time Warner click here.
Shares of Time Warner closed at $33.93 yesterday.
Needham analyst said, "There is currently a 93% correlation between FY12E ROIC and media industry share prices. Wall St closely follows the income statement, ie, the numerator. In this quarterly report, we analyze the denominator - trends in assets employed, capital intensity, and free cash flow. Highlights from TWX’s capital allocation in the 9/30/11 quarter included: 1. Return of Capital. If shares plus debt are shrinking, this implies less capital is being used in the business, which implies rising ROICs. Average Shares Outstanding fell by 21mm (about $700mm), while Net Debt rose by about $300mm in 3Q11. Therefore, net capital returned to capital markets was about $400mm. 2. CapX trends are a lead-indicator of future ROIC growth. TWX’s CapX fell 6% to $174mm in 3Q11- a good sign. However, CapX for the first 9 months of FY11 is up 52% y/y to $511mm, suggesting ROIC weakness. 3. TV & Film. TWX spends 8x more on buying and making TV and film programming than it does on capital spending. TWX’s TV and Film inventory totaled $6.8B at 9/30/11, up 8% Q/Q in 3Q11. 4. Total Assets rose by $262mm (1%) to $66.9B at 9/30/11. Net assets employed rose by $537mm while cash balances fell by $275mm. 5. Cash From Operations posted higher results in 3Q11, up 50% y/y to $1.278B. 6. EBITDA rose 18% y/y to $1.872B in 3Q11 and is up 5% year to date."
For an analyst ratings summary and ratings history on Time Warner click here. For more ratings news on Time Warner click here.
Shares of Time Warner closed at $33.93 yesterday.
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