AOL, Inc. (NYSE: AOL) will hold its quarterly conference call to discuss third quarter 2013 financial results on Tuesday, Nov. 5, 2013, at8:00 a.m. Eastern Time (ET). AOL will issue a press release reporting results before the conference call.
Based in New York City, AOL is an Internet company that develops, grows, and invests in brands and web sites. The company's business spans digital distribution of content, products, and services, which it offers to consumers, publishers, and advertisers. Its properties include TechCrunch, The Huffington Post, Moviefone, Engadget, and MapQuest.
Wall Street expects AOL to earn 35 cents a share, according to analysts polled by Thomson Reuters. The consensus estimate implies an increase of 59.1 percent from earnings of 22 cents in the same quarter last year.
In the past four quarters, AOL's earnings have beat Street view twice while meeting estimates in the remaining two periods. In the last 30 days, two analysts have cut their earnings view, and the consensus estimate has dropped by a penny over the past three months.
Quarterly revenue is expected to rise 3.2 percent to $548.81 million from $531.70 million in the corresponding period prior year. The company's revenue growth has averaged 2 percent in the past four quarters.
Since AOL is operating in the Internet space, unique visitors and web traffic are among the key metrics that are directly related to advertising revenue. For the second quarter, global advertising revenue grew 7 percent while subscription revenues declined 5 percent.
For the first two months of the quarter, worldwide comScore data for AOL showed 3.2 percent growth in unique visitors globally, but also revealed a 9.6 percent drop in total minutes and a 13.7 percent decline in total page views.
comScore data shows that U.S. explicit desktop search queries on AOL Sites decreased 14 percent based on the run-rate through August. This was significantly below the 11 percent growth for core search engines overa! ll and marked a slowdown from 0.6 percent in the second quarter of 2013.
However, U.S. mobile data showed much stronger trends, with unique visitors growing 46.3 percent and mobile minutes growing 25.2 percent.
Membership revenue will be one of the key focus for investors. In late September, AOL launched Gathr – its new subscription bundling service. The Street will be interested in hearing management's thoughts on how this will impact the trajectory of the Membership Group, including thoughts on consumer uptake, ARPU trends and margin impacts (specifically pertaining to marketing & promotional activities)
"We are expecting $206mm of revenues (-7.0% YoY) and $145mm of OIBDA (-7.4% YoY). Within Membership Group, we are expecting $156mm of Subscription revenues (down 9.8% YoY) driven by continued but slowing net subscriber losses," UBS analyst Eric Sheridan wrote in a note to clients.
Within the Brand Group, investors might want an update on Patch and its progress in achieving management's revenue and profitability goals (the target is to reach run rate profitability by the fourth quarter of 2013).
"We are expecting $193mm of revenues (+9.0% YoY) and $3mm of OIBDA (improved from a $10mm OIBA loss in Q3 2012)," Sheridan said.
The market could focus on updates on AOL's online video initiatives, especially regarding Adap.tv contributions.In early August, AOL agreed to buy Adap.tv for $405 million. The takeover is expected to make AOL one of the leaders in online video – an area that will witness strong growth in the coming years as many of the TV ads are expected to shift to Internet. In addition, via Adapt.tv, AOL is well positioned for the shift from manual transactions to programmatic media buying.
AOL management is focused on capturing a larger share of video advertising dollars as video advertising formats gain greater adoption online. According to comScore Video Metrix, AOL ranked second in terms of videos viewed during the first two months of the third! quarter ! of 2013 behind Google/YouTube – maintaining its position from the prior quarter.
On July 8, AOL announced that it had authorized a new $150 million stock repurchase authorization and entered into a 5-year $250 million revolving credit agreement, with the ability to request another $250 million of commitments in the future.
"With this in mind, we look forward to hearing management's latest thoughts on capital returns on the upcoming call," Sheridan noted.
AOL, which was spun off from Time Warner, Inc. (NYSE:TWX) in December 2009 reported second-quarter net income of $28.5 million or 35 cents a share. Excluding items, adjusted net income for the quarter was 46 cents a share. Total revenue for the quarter improved 2 percent to $541.3 million.
AOL shares have traded up following its last three third quarter earnings reports, with an average price increase of 13 percent post results. The stock has underperformed the market by 5 percent year-to-date. Shares of AOL, which traded between $29.16 and $43.93 during the past 52-weeks, trade 19 times the 2014 consensus earnings view.
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