Warner Music Group just reported 159.5% higher earnings

A remarkable 6.8% revenue increase for the quarter ending March 31, 2024, has been propelled by growth in music publishing sales and a rise in recorded music sales for Warner Music Group.

The company’s strategic focus on digital platforms has paid off: digital sales now constitute well over half of total sales.

Although the firm has called off a major acquisition, it’s now focused on strengthening its core business and exploring other strategic opportunities. Meanwhile, the stock trades at 24.4 times the company’s 2024 earnings forecast.

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WARNER MUSIC GROUP CORP. (Symbol WMG on New York; www.wmg.com) began trading on June 3, 2020, following an IPO.

Warner Music is one of the world’s leading music entertainment companies. Its record labels include Atlantic Records, Warner Records, and Elektra Records. Musicians recording on these labels include Bruno Mars, Lizzo, Ed Sheeran, Cardi B, Katy Perry, Madonna, Metallica, Neil Young and Led Zeppelin.

The company also owns Warner Chappell Music, a music publishing company representing more than 80,000 songwriters and composers.

Warner recently approached Believe SA, a global digital music company headquartered in France, to initiate talks about a potential takeover of Believe. Warner was reportedly willing to make a bid of at least 17 euros ($18.52) per share for Believe, valuing the French digital music company at 1.65 billion euros ($1.8 billion) and topping an earlier takeover bid from a consortium.

However, Warner Music has now dropped its plan to make a bid for Believe. The company didn’t outline any specific reasons—but it did face the prospect of a strong rival bid from a consortium made up of Believe’s largest shareholders.

Growth Stocks: Earnings rise significantly to strengthen a healthy balance sheet for Warner Music Group

In the three months ended March 31, 2024, Warner Music’s revenue rose 6.8%, to $1.49 billion from $1.40 billion a year earlier.

Earnings in the latest quarter rose 159.5%, to $96.0 million, or $0.18 a share, from $37.0 million, or $0.06. The results included the impact of exchange rates on the company’s euro-denominated debt, resulting in a gain of $21 million in the latest quarter compared to a loss of $20 million in the prior-year quarter.

Warner Music has a strong balance sheet: it holds cash of $587.0 million, and its $4.0 billion in long-term debt is a manageable 25% of its market cap. The stock yields 2.2%.

Recommendation in Power Growth Investor: Warner Music Group Corp. is a buy.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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