Yahoo Beats Earnings, Sales a Tad Light - Analyst Blog

After the bell Tuesday, Yahoo ( YHOO ) posted earnings results for the company's fiscal 4th quarter of 2013. Net earnings minus stock-based compensation reaching 39 cents per share soundly beat the Zacks Consensus Estimate of 30 cents -- a 30% positive surprise -- while revenues for the quarter came in just a smidge below our consensus of $1,208 million. Yahoo's Search business (ex-TAC) topped expectations while Display (ex-TAC) was lighter than anticipated.

What is responsible for the 5% sell-off in the after-market is unclear at this juncture. But year-over-year comparisons for various revenue metrics including GAAP revenue for full-year 2013 (-6%) and GAAP income from operations in the quarter (-8%) may be playing a part, at first glance. The Display quarterly number is also down 6% from last year, which is Yahoo's bread-and-butter business.

Going forward, with the recent termination of advertising executive Henrique de Castro's tenure, it's pretty safe to assume the major acquisition spree Yahoo had been on over the past year or so is expected to materialize in 2014. "Monetization" is a key word in describing the future of Yahoo -- not even including the estimate $30 per share in cash YHOO stands to make from the long-anticipated Alibaba IPO -- and will likely be a term thrown around quite a bit during the company's conference call.

Thus, as it has been several quarters now, investors will likely be much more interested in where Yahoo is headed than where it's been. The company has managed to negotiate a deal to keep more shares of Alibaba upon the Chinese e-commerce giant going public (Yahoo will still need to sell 208 million shares at that time), and this huge investment is most definitely what has kept Yahoo stock trading at or near its highest levels since around 2005. Then again, with reports of growth in China decidedly weaker over the last couple years -- causing much of the sell-off we've seen in the U.S. markets lately -- perhaps investors this afternoon are less interested in counting all their Alibaba chickens before they hatch.

Yahoo currently carried a Zacks Rank #4 (Sell). Its longer-term recommendation is Neutral. Shares are now down to their lowest levels since the Santa Claus rally late last year, but the stock is still up over 10% for the last three months.

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

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

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