Warner Music Sees 13.7% Profit Surge Despite Revenue Dip

Despite a slight dip in revenue, Warner Music Group demonstrated impressive profit growth with earnings increasing 13.7% to $141 million in the latest quarter. Growth in streaming revenue, a critical segment in today’s music industry, highlights the company’s successful adaptation to the digital landscape and positions it well for future gains as streaming continues to dominate music consumption.

What’s more, the company’s ability to improve profitability even in challenging market conditions is largely due to successful cost management and restructuring efforts.

The stock trades at 21.9 times the company’s forward earnings forecast.

WARNER MUSIC GROUP CORP. (Symbol WMG on Nasdaq; 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.

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

In the three months ended June 30, 2024, Warner Music’s revenue fell slightly, to $1.55 billion from $1.56 billion a year earlier. Recorded Music digital revenue growth was hurt by the termination of a distribution agreement with BMG; that resulted in $26 million less revenue compared to a year earlier.

Growth Stocks: Strong operating performance drives higher profits at Warner Music Group

Earnings in the latest quarter rose 13.7%, to $141.0 million, or $0.27 a share, from $124.0 million, or $0.23. The gain was driven primarily by strong operating performance, savings from the company’s March 2023 restructuring plan and savings from its subsequent Strategic Restructuring Plan.

Warner Music has demonstrated its ability to continue delivering growth in streaming. This resilience in a key revenue segment is a positive indicator for future performance. In fact, the company’s rights to a vast and diverse catalog of approximately one million musical compositions, spanning various genres provides a steady stream of revenue from licensing and royalties.

Warner Music also has a strong balance sheet: it holds cash of $607.0 million, and its $4.0 billion in long-term debt is a manageable 25% of its market cap. The stock yields 2.3%.

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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