Online retailer eBay (EBAY) provided muted outlook for the first quarter and full year 2012 after its fourth quarter earnings came in above street expectations. The important aspect of the result is the improvement in operating margin sequentially though it slipped year-on-year. This is where market is expecting the company to gain to offset earnings projections coming in below Street estimates.
Q4 Result
The San Jose, California-based eBay reported net income of $1.98 billion or $1.51 per share, sharply higher than $559.2 million or 42 cents a share in the year-ago quarter. The profit was driven mainly by the sale of Skype and related items to the tune of $1.66 billion. Excluding the gain, net income would have been $788.6 million or 60 cents a share, up 15.3 percent from $683.8 million or 52 cents a share in the year earlier quarter.
Net revenues surged 35 percent to $3.38 billion from $2.50 billion in the previous year quarter. On average, Wall Street analysts estimated the company to report earnings of 57 cents a share on revenues of $3.32 billion.
While adjusted operating margin slipped to 28.7 percent from 29.5 percent due to the impact of acquisitions and business mix, the company's three divisions' margins improved sequentially indicating that eBay is taking efforts to improve its margins. While Marketplaces margins improved to 40.6 percent from 38.5 percent, Payments and GSI generating divisions' margins grew to 24.7 percent and 21.4 percent from 19.5 percent and 2.8 percent respectively in the third quarter.
Commenting on the results, eBay president and CEO John Donahoe said, "Across eBay, PayPal, GSI and X.commerce, we have a robust portfolio of global commerce platforms and innovative mobile, local and social commerce technology assets. We are well-positioned to compete in the emerging new retail environment, and to help retailers of all sizes grow and engage their customers anytime, anywhere. We are a different eBay today, no longer just an ecommerce leader but a stronger, more diverse global commerce company shaping the future of shopping and payments."
Outlook
Moving ahead, eBay guided adjusted first quarter earnings of 50 – 51 cents a share and GAAP earnings of 37 – 38 cents a share on revenues of $3.05 - $3.15 billion. Street analysts predict the company to earn 54 cents a share on revenues of $3.16 billion.
Similarly, for the year 2012, the company sees adjusted earnings of $2.25 - $2.30 per share and GAAP earnings of $1.76 - $1.81 per share on net revenues of $13.7 - $14.0 billion. Wall Street analysts estimate the company to earn $2.31 a share on revenues of $13.66 billion.
iStock Punch
eBay provided cautious outlook for the first quarter and full year earnings. The company's full year revenues forecast come above analysts' expectations, while its earnings guidance for first quarter as well as full year fails to meet estimation. The market seems to be taking a view that the company will deliver better than what it discloses. Their optimism seems to be based on sequential operating margins improvement in all the three divisions.