ValueClick Inc.
(
VCLK
) is scheduled to release its fiscal fourth quarter 2011 earnings
after the closing bell on February 7, 2012. In the run up to the
earnings release, we do not notice any changes in analyst
estimates.
Recap of third quarter
ValueClick's third quarter bottom line stormed past Zacks
Consensus Estimate, while the top line came in line with the Zacks
Consensus Estimate. Nonetheless, the top-line was ahead of
management's guided range of $128.0-$130.0 million. The
better-than-expected result was primarily driven by strong growth
across all business segments.
Coming to the operational metrics, Operating expenses were $62.8
million, up 12.1% year over year. However, operating expenses as
percentage of revenue decreased to 46.2% from 52.4% in the
prior-year quarter.
Moreover, Operating income increased 30.0% year over year to
$31.2 million, primarily based on lower operating expenses as a
percentage of revenue.
For further details please read:
ValueClick Crushes 3Q Estimates
Expectations from fourth quarter
For the fourth quarter, management expects revenues in the range
of $173.0 million-$179.0 million. The Zacks Consensus Estimate for
the quarter is pegged at $175.0 million.
Management expects earnings on a non-GAAP basis to be in the
range of 39 cents-41 cents per share. The Zacks Consensus estimates
the company to earn EPS of 29 cents, lower than management
expectations.
Adjusted EBITDA is expected in the range of $55.0 million-$59.0
million, which represents adjusted EBITDA margin of 32.4%.
The company expects revenues from Affiliate Marketing to grow in
high-digit range. Owned & Operated websites are expected to
increase in the low-double digits range. Technology is expected to
grow in the high single-digit range. Media segment is anticipated
to grow over 100.0% on reported basis, up in high teens to low
twenties (excluding the impact of acquisitions).
Management expects to scale down some of its low-margin
businesses within the Owned and Operated segment and concentrate on
the high-margin businesses in the Affiliate, Media and technology
segments, as it presents the company with tremendous growth
opportunities to drive the top-line in the forthcoming
quarters.
Estimate Revision Trend
In the last thirty days, none of the 12 analysts covering the
stock made any changes to their estimates, and as a result the
Zacks Consensus Estimate for the fourth quarter remained at 29
cents per share.
For fiscal 2011, the Zacks Consensus Estimate is pegged at $1.17
per share.
The analysts covering the stock expect the company to report
positive earnings and improved revenues on the back of shift in the
business mix from low-margin Owned and Operated segment to
high-margin Media and Affiliate marketing segment. Moreover, a
strong trend in the Mobile Advertising segment during the quarter
is expected to boost the results of the company going forward.
Recommendation
For the past four quarters, ValueClick has exceeded the Zacks
Consensus Estimates by an average of 45.58%. For the current
quarter, we expect ValueClick to beat estimates by the same
magnitude.
Strength in the Internet advertising industry, increasing
e-commerce spending, and improving display ad growth trends
combined with direct advertiser relationships with the Dotomi
acquisition, share repurchases, impressive cash flow and a
debt-free balance sheet are the positives for the company. The
company's concentration in the high-margin businesses is expected
to drive future growth prospects.
Moreover, advertising through mobile is expected to fuel
e-commerce and online advertising growth, evident from the growth
of Android and iPhone unit sales. In 2011, IDC estimates that
Android and iPhone unit sales soared 170% to 320 million in total
unit sales.
We also remain upbeat on ValuClick's growing Affiliate Marketing
segment and expect a turnaround in its Owned and Operated
business.
However, a sluggish macro-economic environment and intense
competition from
Google Inc.
(
GOOG
),
Microsoft Corp.
(
MSFT
) and
Yahoo! Inc.
(
YHOO
) are the near-term headwinds.
We maintain our Neutral rating on the stock over the long term
(6-12 months). Currently, we have Zacks #2 Rank for ValueClick,
which translates to a short-term Buy rating.
GOOGLE INC-CL A (
GOOG
): Free Stock Analysis Report
MICROSOFT CORP (
MSFT
): Free Stock Analysis Report
VALUECLICK INC (
VCLK
): Free Stock Analysis Report
YAHOO! INC (
YHOO
): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment
Research