Warner Music Group released its Q4 and annual earnings yesterday (read 10-K, read 8-K) beating estimates by $0.01 per share while showing mixed results. Q4 revenues increased 2%, publishing revenues increased 7 percent to $137 million and digital music sales increased 9% sequentially and 25% year-over-year.

Annual revenues dropped 4% to $3.385 million, recorded music revenue dropped 6%, digital revenue increased 30%, publishing rose 6%, U.S. revenue dropped 2% and international revenue dropped 4%.

Since cash is king, let's take a look at what happened to cash during the year. During Q4, cash decreased by $63 million. During the year, cash decreased $267 million, due greatly to acquisitions. (Ending cash and cash equivalents balance was $288 million.)

The stock rose 8.1% to $7.73 yesterday. That's higher than the $7.50 target set by Pali Research's Richard Greenfield four weeks ago. With a current share price of $7.38, it looks like the market has judged his most recent target of $5 to be too pessimistic.

As points of comparison, Universal Music Group's Q2 revenues were down 0.8% and first half revenues were down 4.9%. In its last earnings release as a public company, EMI reported a £263.3 million loss and a decrease in revenues of 15.8%.

Others on WMG's earnings:

• Silicon Alley Insider: "Warner Music doesn't formally offer guidance to Wall Street. But read between the lines from its just-concluded Q4 earnings call and it's pretty clear that WMG is going to have a lousy 2008." I haven't heard the conference call replay yet (the link isn't working) so I can't speak for Peter Kafka's interpretation. I will say that during this transitional period, and given competitors' performance, I wouldn't use the word "lousy" to describe a modest or slight profit.
• New York Post: " Warner CEO Edgar Bronfman Jr. said in a call with analysts that both the company and industry remain in transition, with digital remaining a sticking point. 'Digital growth, and particularly mobile, have been on a slower trajectory than initial expectations,' he said. That is putting increasing pressure on the company to find alternative sources of revenue."