WebMD Health nearly lost its pulse last year as profit plunged
into losses and its stock dropped more than 60%.
But the leading health-information website operator has been
gaining strength. Earnings are growing again and the stock has
come back to life, up nearly 150% for the year to date.
After each earnings report delivered so far in 2013, shares
Third-quarter results will be reported on Tuesday. Analysts
expect a better quarter than in Q2, which was better than Q1.
They forecast a Q3 profit of 25 cents a share, up from a loss of
6 cents a share a year earlier, and expect a 10% revenue gain to
$130 million, according to a Thomson Reuters poll.
Earnings reports aren't the only reason shares have
Icahn Stock Buyback
On Oct. 21,WebMD's (
) stock jumped 10.5% after the company announced it had agreed to
buy back all 5.5 million shares from its largest stakeholder,
billionaire investor Carl Icahn, and his affiliates.
That brought total share buybacks since June 30 to 10.8
"It took people by surprise," said S&P Capital IQ analyst
Scott Kessler. "People thought the stock would be sold by Icahn
and then there would be excess supply. But by buying its own
shares, the company suggests they see value in the shares."
This year's all-new top management does indeed see value.
Chief Executive David Schlanger is the third person put into that
job since January 2012. He and the new president and chief
financial officer are not new to the firm, however; they've
worked in other management posts there for years.
The buybacks, Schlanger told IBD in a phone interview on
Wednesday, are a reflection of the company's belief in the
"strong growth opportunities ahead."
"What's going to drive our earnings are the fundamentals of
our business and the opportunities being created by the (changes)
taking place in health care and our unique position in the health
care ecosystem," he said.
It doesn't hurt that drug companies, feeling better about
their own businesses, have taken out more advertising with WebMD
WebMD operates a number of websites tailored for consumers and
health professionals but its flagship, WebMD.com, gets the bulk
of traffic. Citing research from comScore, a WebMD spokesperson
says WebMD.com is the leading individual consumer health site,
with more than 12 times the traffic of the next largest
According to comScore data, WebMD Health websites comprise the
top source of health information on both desktop and mobile
devices in the U.S.
In September, comScore data show, the company's sites
attracted 34.3 million unique visitors on desktop computers, up
9% from a year earlier. They garnered 33.4 million unique
visitors by way of mobile devices in August, the last month for
which data are available, up 174% from a year earlier.
WebMD dispenses health care information to consumers on
everything from diabetes to sunscreens. In August it launched a
"health care reform center" to help people understand the new
health insurance market under ObamaCare.
Most of WebMD's overall medical content is developed in-house
and almost all of it reviewed by physicians. That's different
from most other health sites, which aggregate much of their
content from third parties, Schlanger says.
Websites For Health Pros
With its Medscape brand and website, the firm provides
information and services to physicians and other health care
providers. From this, it tallies online traffic of about 5.5
million physician sessions a month.
The firm's third line of business, WebMD Health Services,
provides management tools and services, including private
portals, to health plans and employers. Some of its larger
clients includeWellPoint (
) andStarbucks (
In May, that WebMD arm landed its largest contract ever, from
Blue Cross and Blue Shield, to provide health-information support
to more than 5 million federal employees starting in January
2014. The value of the award was not disclosed.
"There has been a lot of activity and a lot of changes over
the last couple of years," Kessler of S&P Capital IQ said.
"The fundamentals are improving and we think there will be
The changes weren't so good in 2012. WebMD that year lost
$20.3 million, or 40 cents per share, as pharma customers cut
back ad spending, still cautious from "patent cliff" expirations
and concerned about regulations.
The loss wasn't a surprise. Management had warned early in the
year that it probably wouldn't meet estimates, sending the stock
down -- and down. Before the year ended, the share price had sunk
below 14 from as high as 40 early in 2012.
In December, WebMD said it would lay off 250 people, or about
14% of its workforce.
On May 7, when it reported Q1 results, it was announced that
then-CEO Cavan Redmond would leave immediately, after holding the
job for less than a year. Revenue in the quarter had improved,
but the company still lost 3 cents a share.
Redmond, a former Pfizer executive, had replaced an interim
CEO who had taken over from CEO Wayne Gattinella, who resigned in
January 2012 after trying unsuccessfully to sell the company.
With the focus now on building the business, Schlanger told
IBD in the recent interview that "the company is not for
While advertisers may be feeling more optimistic, WebMD's new
flexible pricing schemes may have spurred more ad buys, analysts
Schlanger says his team plans to better utilize the consumer
and physician ends of the business so that the two may
communicate and share data with each other virtually. A test is
under way, with some physicians sending instructions to patients
through a WebMD app.
"There's a lot more to come. We're heavily focused on building
that connectivity," Schlanger said.
WebMD is trying to get more advertisers to pay for mobile ads
as more consumers use mobile devices to access WebMD's
While WebMD has been attracting more unique desktop users,
page views on desktops fell 21% in Q2 as views on mobile devices
rose, Goldman Sachs analysts said in a research note. Around 37%
of page views came from a U.S. mobile device, up from 34% in Q1,
But Schlanger indicated in a conference call in late July that
the rate of decline in desktop views since Q2 has abated. And at
a Citigroup tech conference in early September, he said that PC
traffic trends had picked up in recent weeks.
While mobile is on the rise, monetizing it presents
"significant challenges," the Goldman analysts said.
Schlanger admits mobile ad revenue "has been modest." Likening
mobile to the early days of TV and the Internet, he said: "You
have to build the audience first and the advertisers will