Online auctioneer eBay Inc. (EBAY), said Wednesday that its fourth-quarter profit surged from last year, driven by a hefty gain from the sale of its Skype unit, and healthy holiday shopping season. Quarterly adjusted earnings exceeded analysts' expectations, as did quarterly revenue.
Looking ahead, the company provided earnings outlook for the first quarter, in line with the Street estimates. For 2010, the company is expecting earnings better than the Consensus view. Following the news, EBay shares gained more than 8% in the after-hours trading.
Though tough competition from peers such as Amazon.com grabbed eBay's market share with large sellers and buyers flocking to new sales outlets, eBay was successful in alluring more customers by bringing about improvements to its site, offering free shipping and guaranteed returns on new items.
According to comScore Inc. (SCOR), online holiday shopping sales were up 4% over last year between the months of November and December. eBay also benefited from the better-than-expected online holiday spending in the U.S.
eBay reported GAAP net income of $1.36 billion for the fourth quarter, an increase of 269% from $367 million in the prior year quarter. Earnings per share jumped 258% to $1.02 from $0.29 in the previous year quarter.
The San Jose, California-based company recorded a net gain of $1.40 billion in the quarter under review, related to the sale of its majority stake in Skype communications unit.
Excluding items, non-GAAP net income grew 12% to $586 million from $524 million in the year-ago quarter. Earnings per share, on a non-GAAP basis, improved 9% to $0.44 from $0.41 over a year earlier. On average, 30 analysts polled by Thomson Reuters expected the company to report earnings of $0.40 per share for the fourth quarter. Analysts' estimates typically exclude special items.
The company's GAAP operating margin decreased to 7.6% from 22.3% in the year-ago quarter, due to the impact from a settlement agreement between Skype, Joltid and entities controlled by its founders.
Non-GAAP operating margin decreased to 29.3% from 32.8% over a year earlier, hurt by recent acquisitions and the company's continuing shift in the mix of its businesses, partially offset by productivity gains.
Fourth-quarter revenue increased 16% to $2.40 billion from $2.04 billion in the same quarter last year. The result included revenue of $112.0 million from Skype. Excluding Skype from the both the quarter, the company posted 19% growth in quarterly revenue. Twenty-seven analysts had a consensus revenue estimate of $2.29 billion for the fourth quarter.
The e-commerce company attributed higher revenue to excellent growth in PayPal and StubHub and in the core eBay business, aided by the positive impact from foreign currency movements.
Revenue from the Payments business unit, which includes online payment service PayPal and short-term credit service Bill Me Later, grew 28% to $795.6 million for the latest quarter, driven by continued momentum in PayPal's Merchant Services business and growth on the eBay platform. Net total payment volume increased 34% to $21.4 billion over a year ago.
Revenue from the Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other e-commerce sites, rose 15% to $1.5 billion, due to strong growth in fixed-price format, and higher international sales. Marketplaces net transaction revenue grew 17% year-over-year.
Gross Merchandise Volume, excluding vehicles, improved 24% to $14.2 billion for the quarter.
On November 19, 2009, eBay sold 70% stake of its Skype communications unit to an investor group in a deal valuing the business at $2.75 billion. eBay received cash proceeds of about $1.9 billion and a note in the principal amount of $125.0 million and retained about 30% equity investment in Skype.
On a GAAP basis, the sale resulted in a net gain of $1.4 billion, with Skype contributing $112.0 million in revenue during the fourth quarter of 2009.
U.S. net revenues for the fourth quarter rose 11% to $1.04 billion, while international net revenues grew 21% to $1.33 billion over a year ago.
Total operating expenses for the fourth quarter increased to $1.52 billion from $1.00 billion in the prior year quarter.
As of December 31, 2009, the company had cash and cash equivalents and non-equity investments portfolio of $5.2 billion.
For the full year 2009, eBay posted GAAP net income of $2.4 billion or $1.83 per share, up from $1.8 billion or $1.36 per share in the previous year. On a non-GAAP basis, net income decreased to $2.1 billion or $1.58 per share from $2.2 billion or $1.71 per share in the prior year. Annual net revenues increased 2% to $8.73 billion from $8.54 billion in the year-ago.
Analysts expected the company to report earnings of $1.54 per share on revenue of $8.65 billion for the year 2009.
For the first quarter of 2010, eBay anticipates GAAP earnings in the range of $0.29 to $0.31 per share, and non-GAAP earnings of $0.39 to $0.41 per share. Net revenues are estimated in the range of $2.1 billion to $2.2 billion, representing growth of 12% to 18% excluding the 2009 impact of Skype. The Street currently projects earnings of $0.40 per share on revenue of $2.16 billion for the first quarter.
For the full year 2010, the company expects GAAP earnings of $1.29 to $1.34 per share, non-GAAP earnings of $1.63 to $1.68 per share, and net revenues in the range of $8.8 billion to $9.1 billion, representing a growth of 9% to 12% excluding the 2009 impact of Skype. Analysts estimate earnings of $1.60 per share on revenue of $9.03 billion for the year 2010.
eBay's rival, Amazon.com Inc. (AMZN) is slated to release its fourth-quarter results on January 28, with analysts forecasting earnings of $0.71 per share on revenues of $9.00 billion. Amazon.com projects fourth-quarter net sales in the range of $8.125 billion - $9.125 billion, representing a growth of 21% - 36% over last year.
EBay closed Wednesday's regular trading session at $22.23, down $1.03 or 4.43% on a volume of 38.53 million shares. In the after-hours, the shares gained $1.79 or 8.05%. The stock has been moving in a range of $9.91 - $25.80 for the past 52 weeks, with an average daily volume of about 14.83 million shares for the past three months.
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