Goldman Ups Time Warner (TWX) Estimates

Time Warner (TWX) will report earnings April 30. Goldman is modestly optimistic, predicting Q1 revenue, EBITDA, and EPS to come in at $11.2 billion, $3.2 billion, and $0.23 respectively. Goldman’s numbers trail Street expectations, but Goldman jacked their EPS estimate from $0.20 reflecting “below the line adjustments”:

We expect 1Q2008 operating drivers to include (1) a less costly release slate with solid box office performance driving double digit EBITDA growth at Film; (2) continued share shift from premium to non-premium ad inventory resulting in minimal ad revenue growth at AOL while acquisition contributions are offset by the loss of’s Apollo contract; and (3) incremental marketing costs associate with truTV temper Networks EBITDA upside from a strong cable ad market.

We remain Neutral rated with a 6 month $16 price target on Time Warner shares as we believe that the potential upside driven by restructuring and financial engineering by management will be limited. Also, we value top-line driven profitability more positively than cost cutting and believe most savings or excess liquidity TWX generates should be redeployed into investments for revenue growth.

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