Yahoo Releases Q3 Earnings

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Yahoo! Inc. (NASDAQ: YHOO) reported third-quarter results late Tuesday after markets closed. The internet portal posted adjusted diluted earnings per share (EPS) of $0.17 on revenue of $1.31 billion. In the same period a year ago, Yahoo reported EPS of $0.08 on revenue of $1.23 billion. Third-quarter results compare to the consensus estimates for EPS of $0.14 on revenue of $1.31 billion.

Due to a change in the way Yahoo accounts for revenue related to its search agreement with Microsoft, the company now reports amounts paid to its affiliates as cost of revenue minus traffic acquisition costs (TAC), rather than as a reduction to GAAP revenue. See the Yahoo press release for further details.

On a GAAP basis Yahoo posted net earnings of $163 million compared with a net earnings of $76 million in the year-ago quarter. Adjusted earnings EPS totaled $0.20 in the third quarter compared with $0.15 in the third quarter of last year.

Due to the pending transaction with Verizon, the company will not have an earnings call or webcast for its third-quarter results.

Yahoo CEO Marissa Mayer said:

In addition to our continued efforts to strengthen our business, we are busy preparing for integration with Verizon. We remain very confident, not only in the value of our business, but also in the value Yahoo products bring to our users’ lives. To that end, we take deep responsibility in protecting our users and the security of their information. We’re working hard to retain their trust and are heartened by their continued loyalty as seen in our user engagement trends.

Search revenue increased from $516 million in the third quarter of 2015 to $703 million helped by the noted accounting change. Absent the change, search revenue fell by 14% to $445 million.

Shares closed down about 0.3% in Tuesday’s regular session at $41.68 in a 52-week range of $26.15 to $44.92. In the after-hours session the stock traded up about 0.8% at $42.00. The consensus 12-month price target on the stock was $43.64 before results were announced.