Wednesday 13 November 2019

Yahoo rises after fourth-quarter sales top estimates

Brian Womack

Yahoo rose 3.8pc in late trading yesterday after reporting fourth-quarter sales that topped analysts’ estimates.

Excluding revenue passed on to partner sites, sales were $1.26bn, beating the average estimate of $1.23bn in a Bloomberg survey of analysts. The company’s total sales fell 4.1pc to $1.73bn, yet still edged out its own forecast of $1.6bn to $1.7bn.

After grappling with a decline in the online ad market last year, Yahoo is benefiting from a rebound in spending by large companies. Yahoo said display-ad sales grew 26pc in the fourth quarter from the previous period.

“Broadly speaking, the numbers were good,” said Ben Schachter, an analyst at San Francisco-based Broadpoint AmTech, who recommends buying the stock. “Certainly they’re benefiting from the ad recovery, but you have to give them some credit for managing through the process.”

Yahoo rose 60 cents to $16.59 in extended trading after adding 13 cents to $15.99 on the Nasdaq Stock Market yesterday. The shares climbed 38pc last year.

The company forecast gross sales of $1.58bn to $1.68bn in the current quarter. That compares with an estimate of $1.55bn by Gene Munster, an analyst at Piper Jaffray & Co in Minneapolis.

The US online display ad market will rebound this year, growing 10pc after a decline of 2pc in 2009, he said in a research note.

Higher prices

Companies are pushing harder to get ad space on Yahoo pages, boosting the price it can charge, said Colin Gillis, an analyst with BGC Financial LP in New York.

Yahoo “stopped the pricing erosion,” said Gillis, who rates the stock a “buy.”

Net income attributable to Yahoo was $153m, or 11 cents a share, compared with a loss of $303.4m, or 22 cents, a year earlier, the company said yesterday in a statement.

Aaron Kessler, an analyst with Kaufman Brothers LP, said the company did well in display ad sales though failed to keep pace with Google in search ads.

“It was a mixed quarter,” said Kessler, who has a “buy” rating on the stock and doesn’t own it. “There’s nothing to get too excited about.”

Excluding some expenses, profit was 15 cents a share. Analysts had predicted 17 cents, according to the Bloomberg survey.

Analysts surveyed by First Call had estimated earnings per share, under generally accepted accounting principles, of 11 cents, according to a January 26 note from Deutsche Bank AG.

Chief Executive Officer Carol Bartz said on a conference call with analysts that her first year on the job had been a “wonderful ride,” though a “very bumpy” one, as she restructured the company amid an economic slowdown. She said the online ad business appears to be returning to normal.

“We’re just getting started,” Bartz said on the call. “We’re feeling good heading into 2010.”

Under Bartz, Yahoo has buoyed its profit by reducing costs, including reducing staff. Last year, the company shut the Web- hosting unit GeoCities and an online storage site called Briefcase.

Yahoo also is looking to reduce costs associated with its search business, such as engineering. Yahoo struck a deal with Microsoft that’s expected to close early this year.

Under the partnership, Yahoo will put Microsoft’s Bing search engine on its websites, and the two companies will split the related advertising revenue.

The partnership may help both companies compete better with Google, which claimed 65.7pc of Internet searches in the US last month, according to ComScore.

Microsoft’s market share increased to 10.7pc last month from 8pc in May, before the June debut of Bing. Yahoo’s share declined to 17.3pc from 20.1pc over the same period.


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