Shutterfly, Inc. SFLY reported mixed fourth-quarter 2018 results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line lagged the same. Notably, this marked the company's eighth straight quarter o f earnings beat, while revenues missed estimates for the second straight quarter.
Following the results, shares of Shutterfly decreased 6.3% in after-hours trading. Also, the stock has lost 45.9% compared with the industry 's 30.5% decrease in the past six months.
Adjusted earnings came in at $5.47 per share, beating the consensus estimate of $5.28. The bottom line also surged 75.9% on a year-over-year basis.
Net revenues totaled $950 million, which improved 60% year over year but fell short of the consensus mark of $956 million. The sharp increase in the top line was primarily owing to robust performance by the Lifetouch and Business Solutions segment, offset by a lower-than-expected Shutterfly Consumer segment revenues. Notably, fourth-quarter earnings marked the 72st consecutive quarter of year-over-year net revenue growth.
Revenues in Detail
Revenues at the Consumers category amounted to $528 million, up 1% year over year. The segment's lower-than-expected performance was due to a 17% decline at Tiny Prints boutique. However, Shutterfly brand revenues increased 3% during the quarter.
The Lifetouch segment generated revenues of $348 million. This segment was formed following the acquisition of Lifetouch. Revenues from the Shutterfly Business Solutions (SBS) segment rose 3% year over year to $74 million.
Unique customers declined 1% year over year to 6.1 million and total orders decreased 7% year over year to 9.8 million. Meanwhile, average order value increased 8% to $54.03 backed by better product mix and larger basket size.
Shutterfly, Inc. Price, Consensus and EPS Surprise
Shutterfly, Inc. Price, Consensus and EPS Surprise | Shutterfly, Inc. Quote
Adjusted gross margin in the fourth quarter was 60.3%, which was below the midpoint of the company's guidance due to lower consumer revenues. Shutterfly Consumer gross margin contracted 90 basis points (bps) to 62.1% primarily due to lower volumes, pricing pressure and product mix.
However, Lifetouch gross margin was 67.4%, in line with the company's expectation. Shutterfly Business Solutions' gross margin expanded 120 bps to 19.4% on reduction in technology related expenses.
The company reported adjusted EBITDA of $319.8 million, which was below the company's expectation. Operating expenses totaled $313.4 million.
Shutterfly exited the fourth quarter with cash and cash equivalents of $521.6 million compared with $489.9 million at the end of 2017. Accounts receivables summed $87 million, down from $82.3 million as of Dec 31, 2017. Long-term debt totaled approximately $1,090.4 million compared with $292.5 million at the end of 2017.
For first-quarter 2019, net revenues are projected between $317 million and $328 million. Gross profit margin is estimated in the range of 35.8-36.7%. Adjusted EBITDA loss is anticipated in the $43-$48 million band. Operating loss is envisioned in the $102-$107 million range.
Also, Shutterfly Consumer revenues are projected in the band of $146-150 million, while the same from Shutterfly Business Solutions are likely to be between $45 million and $48 million. Lifetouch revenues are envisioned in the $126-$130 million range.
Net revenues are estimated to be between $2,130 million and $2,210 million. Gross profit margin is expected to be in the 51.4-51.7% range. Meanwhile, adjusted EBITDA is anticipated in the band of $315-$340 million. Operating income is envisioned in the $76-$101 million range.
Also, Shutterfly Consumer revenues are projected in the band of $975-1,025 million, while the same from Shutterfly Business Solutions are likely to be between $240 million and $250 million. Lifetouch revenues are envisioned in the $915-$935 million range.
Zacks Rank & Stocks to Consider
Shutterfly currently has a Zacks Rank #4 (Sell).
Better-ranked stocks worth considering in the same space include Yelp Inc. YELP , TheStreet, Inc. TST and SINA Corporation SINA , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Yelp reported better-than-expected earnings in each of the trailing four quarters, the average being 105.4%.
TheStreet's earnings in the current year are likely to witness 487.5% growth.
SINA Corporation earnings have surpassed the consensus estimate in the trailing three quarters.
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