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Warner Music (WMG) Q4 Earnings Top Estimates, Revenues Up Y/Y

Warner Music Group's WMG fourth-quarter fiscal 2022 earnings of 28 cents per share beat the Zacks Consensus Estimate by 115.38%. The company reported earnings of 5 cents per share in the year-ago quarter.

Revenues of $1.50 billion beat the consensus mark by 6.91% and increased 8.8% year over year. At a constant currency (cc) basis, revenues increased 16% year over year.

Region-wise, revenues from the United States (49% of revenues) increased 16.1% year over year to $734 million. International revenues (51% of revenues) climbed 2.6% year over year to $764 million.

Top-Line Details

Digital revenues (66.1% of revenues) were $989 million in the reported quarter, up 6.8% year over year (12.3% at cc). The segment benefited from 3.5% growth in streaming revenues. Downloads and other digital jumped 86.1% year over year.

Warner Music Group Corp. Price, Consensus and EPS Surprise

Warner Music Group Corp. Price, Consensus and EPS Surprise
Warner Music Group Corp. Price, Consensus and EPS Surprise

Warner Music Group Corp. price-consensus-eps-surprise-chart | Warner Music Group Corp. Quote

 

Streaming revenues benefited from higher subscriptions, driven by emerging streaming platform deal renewals, which more than offset the decline in ad-supported revenues.

Warner Music continues to witness subscriber growth, with developed markets growing in the double digits and emerging markets at higher percentages. Price increases by Apple and Deezer bode well for the company. Improved engagement is also expected to boost top-line growth.

Artist services and expanded-rights revenues increased 21.4% year over year (33.3% at cc) to $204 million.

Licensing revenues increased 24.3% year over year (38.1% at cc) to $87 million in the reported quarter.

Recorded music revenues increased 6.1% year over year (13.1% at cc) to $1.24 billion.

Music publishing revenues were up 23.9% year over year (32.3% at cc), amounting to $254 million. Performance and digital revenues jumped 33.3% (48.1% at cc) and 32.5% (39.5% at cc), respectively.

Operating Details

In the fiscal fourth quarter, adjusted OIBDA increased 21.6% year over year to $265 million. Adjusted OIBDA margin expanded 10 basis points (bps) on a year-over-year basis to 16.4%.

Recorded music adjusted OIBDA increased 10.8% year over year to $226 million. Music publishing adjusted OIBDA increased 22.4% year over year, amounting to $60 million.

Adjusted EBITDA increased 16.5% year over year to $276 million. EBITDA margins contracted 70 bps year over year to 17.1%.

Selling, general and administrative expenses increased 1.1% year over year to $470 million.

Adjusted operating income increased 31.7% year over year to $183 million in the reported quarter.

Balance Sheet

As of Sep 30, 2022, Warner Music had cash and cash equivalents of $584 million and long-term debt of $3.73 million.

Free cash flow was $368 million compared with $193 million reported in the year-ago quarter.

Zacks Rank & Stocks to Consider

Warner Music currently carries a Zacks Rank #4 (Sell).

Warner Music has outperformed the Zacks Consumer Discretionary sector year to date. While WMG shares have declined 28%, the sector is down 35.2%.

Some better-ranked stocks in the broader sector are Manchester United MANU, RCI Hospitality RICK and G-III Apparel Group GIII. All three stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of MANU and RICK have returned 4.9% and 14.4%, respectively, on a year-to-date basis. GIII shares have declined 22.3% over the same time frame.

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Warner Music Group Corp. (WMG) : Free Stock Analysis Report

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