eBay Forecast Undercuts Inline Earnings

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eBay Inc. (NASDAQ: EBAY) reported fourth-quarter and full-year 2015 results after the markets closed Wednesday. The e-commerce giant posted adjusted diluted earnings per share (EPS) of $0.50 on revenues of $2.3 billion. In the same period a year ago, eBay reported EPS of $0.55 on revenues of $4.92 billion. The Thomson Reuters estimates called for EPS of $0.50 and $2.32 billion in revenue.

For the full-year EPS totaled $1.83 on revenues of $8.59 billion compared with 2014 EPS of $1.89 and revenues of $17.9 billion. Analysts were looking for EPS of $1.83 and revenues of $8.59 billion. eBay’s Pay Pal and eBay Enterprise businesses were spun off in 2015, cutting annual revenues by half.

Gross merchandise value (GMV) rose 5% in the quarter to $21.9 billion excluding currency exchange effects.

eBay generated $1.1 billion of operating cash flow from continuing operations and $1.0 billion of free cash flow from continuing operations, and also repurchased $550 million of its common stock and completed the divestiture of its Enterprise business on November 2, 2015.

The CEO said:

We delivered solid fourth quarter results and continued to make progress against our key priorities. The quarter also marked the end of an extraordinary year during which we completed the spin-off of PayPal. We continue to grow our business and customer base while executing our plan to reposition eBay for long-term success.

The company’s first quarter outlook calls for revenues of $2.05 to $2.1 billion and adjusted EPS of $0.43 to $0.45. The EPS outlook is considerably short of the consensus estimate of $0.48 billion. The consensus revenue forecast calls for $2.16 billion, well ahead of the top of eBay’s expected range.

For the full year, eBay expects revenue of $8.5 to $8.8 billion and adjusted EPS of $1.82 to $1.87. The consensus estimate calls for EPS of $1.98 and revenues of $8.99 billion.

Investors won’t be smiling at the forecast numbers, and even the inline results for the quarter and the year will not help.

eBay’s shares closed at $26.42 today in a 52-week trading range of $22.11 to $29.83. Shares are down about 10% in after-hours trading at $23.86. Thomson Reuters had a consensus analyst price target of around $30.48 before today’s report.