Time Warner (TWX: NYSE)
By Sterne, Agee & Leach
We maintain our Buy rating and $83 price target for Time Warner.
We see Time Warner (ticker: TWX) as a stock with an identifiable path to price-to-earnings expansion (Time Inc. [magazine operations] spinoff, in the second quarter).
For Time Warner's CNN segment, we think that an estimated 335 basis points margin compression in fiscal 2013 due to ad-revenue declines and incremental programming spending masks robust growth at the rest of the networks. Our analysis shows that CNN should be less of a headwind starting in fiscal 2014 and Networks adjusted operating-income growth will accelerate.