Yahoo Exceeds Sales & Profit Estimates

Yahoo! Inc. (YHOO), the biggest U.S. Web portal, reported profit and sales that beat estimates as Chief Executive Officer Marissa Mayer benefited from advertising demand and cost cuts during her first three months on the job.

Third-quarter earnings, excluding some items, were 35 cents a share, the Sunnyvale, California-based company said in a statement. Sales, excluding revenue passed to partner sites, was $1.09 billion. Analysts on average had estimated profit of 26 cents on revenue of $1.08 billion, according to data compiled by Bloomberg.

The fifth CEO in four years, Mayer is working to restore stability to management ranks and reverse three years of declining revenue as Web users ditched Yahoo in favor of competitors Google Inc. (GOOG) and Facebook Inc. (FB) Her turnaround effort is getting a boost from expense reductions as well as demand in the U.S., where the online advertising market is projected to grow 17 percent to $37.3 billion this year, according to researcher EMarketer Inc.

“The U.S. seems to be an area of strength, and Yahoo is bigger in the U.S.” than its competitors, said Herman Leung, an analyst at Susquehanna International Group who has a neutral rating on the shares.

Yahoo advanced in extended trading. The stock decreased less than 1 percent to $15.77 at the close in New York. The shares have dropped 2.2 percent this year.

Net income attributable to Yahoo rose to $3.16 billion, or $2.64 a share, from $293.3 million, or 23 cents, a year earlier. Income in the 2012 period included a net gain of $2.8 billion related to the sale of a stake in Alibaba Group Holding Ltd.

Ad Revenue

Revenue for display advertising, minus sales passed to partner sites, was little changed at $451.6 million in the quarter, while search revenue increased 11 percent to $414.1 million.

In a departure from past practice, Yahoo didn’t provide an outlook for sales and operating income. Google, Mayer’s former employer, doesn’t issue earnings forecasts.

Mayer has kicked off her Yahoo comeback strategy by hiring several senior deputies. Earlier this month she named Henrique de Castro, previously Google’s vice president of global partner business solutions, as operating chief. Last month, she hired Ken Goldman away from network-security provider Fortinet Inc. to replace Tim Morse as chief financial officer. In August, Mayer added former American Eagle Outfitters Inc. executive Kathy Savitt to lead marketing efforts.

Yahoo’s share of display ads, including banners, will be 9.3 percent this year in the U.S., down from 11 percent last year, EMarketer estimates. Facebook’s portion of the market will be little changed at 14 percent, while Google’s stake will rise about 2 percentage points to 15 percent.

Mayer has taken steps to curtail operations outside the U.S. She completed Yahoo’s sale of half its stake in Chinese partner Alibaba in September, and last week said Yahoo will shut its South Korea business.

Yahoo said it will return $3 billion in proceeds from the Alibaba transaction to investors, after using $646 million for buybacks in recent months.