Yandex (YNDX) Up 0.5% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Yandex (YNDX). Shares have added about 0.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Yandex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Yandex's Q1 Earnings & Revenues Top Estimates
Yandex reported first-quarter 2019 adjusted earnings of 27 cents (RUB 10.59) per share beating the Zacks Consensus Estimate by 3 cents. Further, it surged from the year-ago quarter’s figure of RUB 7.10.
Revenues of $576 million (RUB 38.3 billion) surpassed the Zacks Consensus Estimate of $548 million. The figure exhibited year-over-year growth of 40% in ruble terms.
The company’s growing momentum in the Russian search market and increasing advertisement revenues drove the top line during the reported quarter. Further, robust performance by Taxi, Classifieds, Media Services and Experiments segments of the company contributed to the results.
Additionally, the company witnessed growth of 11% in its paid clicks during the reported quarter.
However, the deconsolidation effect of Yandex.Market remained an overhang throughout the first quarter. Excluding this impact, year-over-year growth in paid clicks would have come at 20%. Further, revenues would have reflected growth of 45% on a year-over-year basis.
Total online advertising revenues came in RUB 27.04 billion (73% of total revenues), exhibiting growth of 18.4% on a year-over-year basis.
This was primarily driven by robust performance of Yandex properties which accounted for 77.3% of the total advertising revenues and exhibited year-over-year growth of 20%. Further, Advertising network revenues contributed 22.6% to advertising revenues and grew 14.2% from the year-ago quarter.
Excluding deconsolidation effect of Yandex.Market, the online advertising revenues would have improved 25%.
Taxi revenues of $7.6 billion (20% of total revenues) surged 145% on a year-over-year basis. This was driven by increasing number of rides.
Other revenues of RUB 2.6 billion (7% of total revenues) soared 325% from the prior-year quarter. This can be attributed to the well-performing Yandex.Drive and Yandex.Music. Further, strong IoT initiatives remained positive.
Segments in Detail
Search and Portal: The segment generated RUB 27.12 billion revenues (72.7% of total revenues), up 26% year over year. The company’s strong position in the Russian search market remains a key catalyst. Notably, its market share reached 57% during the reported quarter. This can be attributed to Yandex’s increasing desktop and mobile search shares which reached 68.5% and 49%, expanding 100 bps and 390 bps year over year, respectively. The company’s search share on Android and iOS came in 51.2% and 48.1%, respectively. Mobile traffic accounted for 51.8% of the total search traffic in the reported quarter.
Taxi: The segment generated RUB 7.6 billion revenues (20% of revenues), surging a whopping 145% from the year-ago quarter. Impressive year-over-year growth was driven by increasing number of rides which surged 64% from the prior-year quarter. This drove growth in the company’s ridesharing business. Further, robust performance by corporate Taxi and food delivery business contributed well.
Classifieds: The segment generated revenues of RUB 1.12 billion (3% of revenues), advancing 57% year over year. Revenues from listing fees and VAS accelerated top-line growth within this segment.
Media Services: The segment generated revenues of RUB 734 million (2% of revenues), advancing 74.3% from the year-ago quarter. This came on the back of growing subscription revenues, video advertising and commissions from ticket sales.
Other Bets and Experiments: The segment yielded RUB 2.5 billion revenues (6.6% of total revenues), up from $779 million in the prior-year quarter. This was driven by robust performance of Yandex’s Zen, Yandex.Drive and Geo services.
In first-quarter 2019, adjusted net income margin was 14.6%, contracting 50 bps from the year-ago quarter.
Per the company, its operating margin came in 14.4% in the first quarter, expanding 250 bps from the year-ago quarter.
Further, Adjusted EBITDA margin was 28.9%, contracting 10 bps year over year. This can be attributed to increasing investment in content, Yandex.Drive and Yandex.Cloud. Also, growing marketing and advertisement costs affected negatively.
Operating expenses as a percentage of revenue was 85.6%, contracting 250 bps from the year-ago quarter.
The company’s total traffic acquisition cost (TAC) came in RUB 5.3 billion, surging 23.7% on a year-over-year basis.
Balance Sheet & Cash Flows
As of Mar 31, 2019, cash and cash equivalents were $831.5 million, down from $990.3 million as of Dec 31, 2018.
Accounts Receivables totaled $233.8 million, increasing from $209.7 million in the previous quarter.
For the first quarter, cash flow from operations was $162.6 million which surged from the previous-quarter figure of $123.9 million.
For 2019, management raised guided range for revenue growth from 28-32% to 30-34% in ruble terms from 2018, excluding the Yandex.Market.
The company also increased the guided range for revenue growth in Search and Portal from 18-20% to 19-21% from 2018 in ruble terms.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
Currently, Yandex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Yandex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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