After normal trading on Monday, Yahoo! Inc. (YHOO) posted a solid EPS beat of 32 cents per share, 18.5% higher than the 27 cents expected, and bettered the top line as well, with revenues of $1.22 billion — more than the expected $1.21 billion. Yahoo shares were up more than 3% in the after-market after remaining mostly flat at the end of regular trading.
And score another one for Zacks ESP: our system predicted a positive earnings beat, at 14.8%. This marks the 5th consecutive quarter of Yahoo topping estimates, including the company's stellar 45% positive surprise in Q3, which marked the introduction of then-new CEO Marissa Mayer, who was previously a strong player in Google's (GOOG) rise to success.
Its Search revenues came through in the quarter, improving to $482 million. Display ads, on the other hand, came in light at $520 million. That, besides no real long-term growth initiatives, no plans for restructuring — in fact, no guidance at all — are what will keep Yahoo from being a growth story for the time being.
Thus, Yahoo is a turnaround story, and this remains Mayer & Co's main challenge. Establishing consistent revenue growth over time, however, will be necessary to bring the Yahoo brand back toward the upper tier of companies like Google and Amazon (AMZN). Easier said than done, of course.
We'll have much more in our breakdown of the YHOO earnings report later, but the turnaround story does seem to be progressing. Shares of Yahoo carry a Zacks Rank #1 (Strong Buy) at this time.
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