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.

Wall Street Shows Lust for Google and Caution For Yahoo.

Search Engines Continue To Lead Technology Stock Plays.



Internet earnings season shifted into high gear this month with the major search engines drawing the largest spotlights. Yahoo the once proud grandfather of keyword search is being viewed with caution and the ever elite Google guys are drawing sheer lust with daily run-ups topping $600 per share. Some investment analysts (still unsure of the keyword search space) are happy plodding slowing along as they increase their stakes with Yahoo and continue to look for optimistic signs of its ability to catch up with Google’s keyword advertising strength.

Deutsche Bank analysts predict Yahoo results to be in-line with expectations or just slightly below as they place a humble and down $24 target on Yahoo shares which is nearly 15% lower than Yahoo's recent share price trends of $27+. Other high rolling investment firms clad in french cuff shirts and designer cufflinks expect Yahoo’s earnings to drive and support a confident $30 target, suggesting that Yahoo stock will rise nearly 8% during the next year.

Yahoo shares are up 9% so far in 2007, and the company has been through some significant changes with the departure of former CEO Terry Semel, who was replaced in June by co-founder Jerry Yang. The Yahoo Panama advertising platform was launched to help the former king of search better compete with arch rival and long-time Yang friends Google for the coveted search-advertising dollars. Recent speculation and hints by Jerry Yang that Yahoo will be sold off in chunks with AT&T gobbling up many profitable parcels have also helped Yahoo prop their share prices up. Some market analysts including a leading broker from a flint hospital also view Yahoo as more successful than Google in getting advertisers to spend more money on search ads quarter-over-quarter. Those hidden Yahoo Pay Per Click account re-charges might drive short-term results however they also spike advertisers frustration levels and push quality PPC accounts away from Yahoo toward Google and MSN.

Speaking of Google the lust for GOOG is running huge on the street, Goldman Sachs analysts deemed Google as their top pick in the Internet industry and view Google and keyword search as the primary driver of the Internet stock sector that is up nearly 50% year-to-date. “We continue to view the Internet sector as our favorite sector across communications, media and entertainment given the benefits of strong secular growth trends and significant international exposure, both of which offset a U.S. slowdown, especially in newspaper, radio, and television advertising.”

One analyst added “The performance-based nature of keyword search advertising and its ability for direct response lead to higher portions of advertising budgets being allocated to the major search engines, especially Google AdWords. We do have a concern with one aspect of Pay Per Click Search Advertising: Click Fraud.”

In researching the numbers "we find few companies as well positioned as Google.” Google Investors are looking for new updates on Google's continuing transformation of YouTube and quality of overlay advertising within the online video space.