This recent IPO reports earnings on February 1, and analysts are forecasting annual growth of 45.86% over the next five years.
Warner Music Group Corp. (WMG)
From Power Growth Investor
Warner Music Group is a Power Buy. Through your shares, you’re buying into one of the world’s leading music entertainment companies. Its record labels include Atlantic Records, Warner Records, and Elektra Records. Musicians selling under 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 Music’s recorded music business accounts for 86% of its overall revenues. Its music publishing business generates the remaining 14%.
U.K. billionaire Len Blavatnik acquired Warner Music in 2011 for $3.3 billion. At the time, the music industry was in decline. However, it has since seen a major revival.
The company didn’t receive any of the proceeds from the IPO. Instead, Blavatnik sold 70 million of his own shares. The billionaire still has control of the company after the sale, with 99.1% of the voting shares.
The value of music assets has rebounded following the start of tough times in 2001 due to online piracy and collapsing CD sales. Global recorded-music revenue grew by an estimated 8.2% in 2019 to $20.2 billion. Streaming accounted for more than half of the total for the first time.
In the three months ended September 30, 2020, Warner Music’s revenue was virtually unchanged at $1.126 billion, compared to $1.124 billion a year earlier. Music publishing sales fell 2% to 169% million. However, that was offset by a 1% rise in recorded music sales to $958 million.
Digital sales of both music publishing and recorded music rose 15.4%, to $778 million from $674 million. Digital sales now make up 69% of total sales.
Earnings in the latest quarter fell 84.0%, to $20.0 million, or $0.04 a share, from $125.0 million, or $0.25. The decline was mostly due to accounting charges on debt refinancing and foreign tax-credit adjustments.
Warner Music has a strong balance sheet: it holds cash of $553.0 million, and its $3.1 billion in long-term debt is a low 16% of its market cap.
The company recently started paying dividends. Investors received the first regular quarterly payment of $0.12 a share on September 1, 2020. The stock yields 1.3%.
Warner Music is a Power Buy.
Patrick McKeough, Power Growth Investor, tsinetwork.ca, 888-292-0296, February 2021