AOLTW Q2 EXCEEDS EXPECTATIONS: HAVE WE FINALLY HIT BOTTOM?

On a day in which Wall Street rebounded, with the Dow Jones up a record-shattering 488.88 points, beleaguered AOL Time Warner provided a measure of comfort to shareholders who had been calling for outgoing COO Bob Pittman’s head (see hitsdailydouble.com, 7/18).

The world’s largest media and Internet company posted a second quarter profit of 24 cents a share, on an estimated $10.6 billion in revenue, compared with a 32 cents-a-share profit on earnings of $9.2 billion over the same period last year. The figure was two cents better than had been estimated by the consensus of pundits at Thomas Financial/First Call.

The company’s net income came in at $394 million, or nine cents a share, compared with a loss of $374 million, or 17 cents a share in last year’s second quarter.

AOL shares dropped to $10.66 in after-hours trading. The stock closed the regular session down 15 cents to $11.40 against the backdrop of the Dow Jones’ near-500 point rise.

Three months ago, the company reported the largest quarterly loss in corporate history. With Pittman’s exit, Chief Executive Richard Parsons named Jeff Bewkes of HBO and Don Logan of Time Inc. to share the COO slot. AOL founder Steve Case, who had also been rumored to be on the chopping block, reportedly supported the move and planned to stay at the company. AOL stock has fallen 39% since Parsons replaced outgoing CEO Gerald Levin, with Wall Street skeptical the new chief could concoct an effective growth plan for the company to marry the old and new economies represented by the merger. In all, AOL stock has fallen 73% over the last 12 months.

Stock analysts predicted the stock may well have bottomed out and the share price "could double" in the next 12 months. Experts predicted the company’s AOL unit will show improvement if the online advertising business can effect an upturn.

Parsons also disclosed that the SEC is conducting a "fact-finding" investigation into the way the company’s AOL unit accounted for certain advertising transactions.