Q2 Preview: Bartz's Honeymoon Over, Now Yahoo! (YHOO) Should Get to Work

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Yahoo! (Nasdaq: YHOO) shares are modestly higher Tuesday afternoon as traders prep themselves for second-quarter earnings results. Yahoo! will release earnings this afternoon following the close of trading.

The company is expected to report earnings of 18 cents per share on revenue of $1.11 billion. Hitting the Street's expectations would mark a 5.9 percent increase sequentially, and 20 percent gain from the 15 cents per share reported in the same period last year.

Yahoo! shares currently trade at 15.9x FY12 earnings estimates, compared with 15.2x for Google (Nasdaq: GOOG) and 20.9x for AOL, Inc. ( AOL ).

Data from Bloomberg has 14 analysts with a Buy rating, 19 at Hold, and zero suggesting to sell. Click here for some color on those calls in our Ratings Insider section. Further, the Street price target average is $19.50 with a low of $16 and high of $24. Yahoo! has traded in a range of $12.94 to $18.84 over the last 52-weeks.

Analyst Comments

  • Deutsche Bank sees EPS of 21 cents on revenue of $1.09 billion. Commenting on its outlook: "From a top-line standpoint, we expect a 3% decline in net revs, based on 14% growth in display ads (which looks to be in line or lower vs. ests) while paid search is estimated to fall 19% Y/Y. We think that paid search queries were largely in-line with expectations while monetization is guaranteed through 1Q 2012. We believe the variance between current Microsft CPCs and the Yahoo! guarantee runs at about 10% currently, with the holiday season representing a key time period in which monetization needs to improve on CPCs. At current CPC rates, we estimate that 2012 forecasts would be impacted by $110mn in revs and $90 - $100mn in EBITDA."

    Keys on the call include: an update on Yahoo!'s progress in talks with Alibaba regarding compensation for the transfer of Alipay to a Jack Ma wholly-owned entity; display and paid search trends; and new applications on Yahoo!'s tablet/mobile efforts.

  • Recently, Jefferies made some comments ahead of Yahoo!'s earnings. "The firm isn't looking for anything too surprising this quarter, earnings expected to be in-line with the consensus. Revenues, ex-TAC, should be $1.12 billion with earnings of 19 cents per share."

  • BGC Capital sees earnings of 18 cents per share on revenue of $1.112 billion. On management: "While CEO Carol Bartz has entered into the third year of her contract, the company is still very much in the process of turning itself around. In our opinion, while she has just finished assembling her team of senior talent including new additions such as Ross Levinsohn to oversee Yahoo Americas and Wayne Powers to oversee sales (both in November 2010), and Blake Irving last spring as Chief Product Officer, the honeymoon is long over and lackluster results could increase concerns on the pace of the turnaround."

    BGC sees display revs of $53 million ex.-TAC. Search, also ex.-TAC, will be $358 million. Further: "The company has done an excellent job of controlling costs which is reflected in its operating margin doubling to 12% in 2010 from 6% in the prior year. However the earnings expansion is now a year old and the benefits from the cost cutting have been seen."
Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of the release.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: AOL , GOOG , YHOO

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