Warner Music Group Corp. shares hit new high on smaller 4Q loss

Shares of Warner Music Group Corp., one of the world's largest recording companies, hit a new high today after the company reported a smaller loss for the fourth quarter as revenue climbed 13 percent. Shares of the company rose 99 cents, or 5.5 percent, to $19.04 in midday trading on the New York Stock Exchange after earlier setting a new high of $19.16. Warner Music went public in May.

The New York-based company, which is home to big-name artists including Madonna, Kid Rock and Faith Hill, posted a loss of $30 million (Ђ25.5 million), or 21 cents per share, compared with last year's fourth-quarter loss of $137 million (Ђ116.7 million), or $1.27 per share. Revenue grew to $905 million (Ђ770.5 million) in the quarter ended Sept. 30, up from $798 million (Ђ679 million).

Stripping out one-time items and stock-option expenses, Warner said it would have reported adjusted earnings for the fourth quarter of 8 cents per share, compared with an adjusted loss of $1.01 per share in last year's quarter. Wall Street expected Warner to report a loss, excluding items, of 4 cents per share on lower revenue of $814.4 million (Ђ693.4 million), according to analysts estimates from Thomson Financial.

Warner, which has been working to capitalize on the fast-growing online music market, said digital revenue represented 6 percent of its total revenue during the quarter, rising 20 percent from the third quarter to $53 million (Ђ45 million). For the full year, digital revenue grew more than fourfold to $157 million (Ђ133.7 million).

Goldman Sachs analyst Anthony Noto, in a client note, said the results "reinforce our view that (Warner Music) can drive sustainable growth by leveraging the digital transformation and more efficiently running the music business." Among Warner's biggest sellers in the fourth quarter were James Blunt, Faith Hill, Green Day, Eric Clapton, Sean Paul, Disturbed, Staind and Craig David, Warner said.

Revenue from recorded music rose 17 percent to $775 million (Ђ660 million) in the quarter, while music publishing revenue fell 2 percent to $137 million (Ђ116.7 million). Excluding last year's $9 million (Ђ7.7 million) in revenue from its sheet music business, which Warner sold in May, publishing revenue rose 5 percent in the quarter.

Deutsche Bank analyst Doug Mitchelson called Warner's fourth-quarter results "fantastic," and said the company's release slate for the first quarter of fiscal 2006 is "very strong." Mitchelson noted that Madonna's newest album, "Confessions On A Dance Floor," reportedly sold 3.5 million copies worldwide in its first week, debuting at No. 1.

Mitchelson also sees gains for Warner in the second quarter, as music lovers who get iPods for Christmas drive sales on iTunes, Apple Computer Inc.'s online music store.

For the full year, Warner's annual loss narrowed to $169 million, or $1.40 per share, from a loss of $1.42 billion in the prior year. Annual revenue edged up 2 percent to $3.5 billion from last year's $3.44 billion, the AP reports. Keeping with policy, Warner didn't disclose its expectations for future earnings or revenue.

A.M.