Yahoo! Beats, Stock Gets Beaten

Apparently, beating consensus earnings estimates but coming short on the top-line counts as a miss these days. After the closing bell Tuesday, Yahoo! Inc. (YHOO) reported earnings per share (EPS) of 15 cents on revenues totaling $1.13 billion for its fiscal 2nd quarter. The Zacks Consensus Estimate was 14 cents per share, and analysts had been looking for a slightly higher $1.16 billion in sales.

After hours, YHOO stock sank like a stone on the news — falling more than 6% at one point. We saw the same thing happen yesterday when IBM (IBM) marginally beat expectations and was rewarded with a 5% sell-off in the after-market.

Yahoo! more than doubled its year-ago EPS of 7 cents, and met the 15 cents per share posted in the 1st quarter. But that 67% positive surprise was supposed to be a harbinger for things to come: big earnings homeruns and revenues out of the park. It was not to be in the 2nd quarter, and even the company’s increased revenue expectation for the 3rd quarter to $1.57-1.65 billion was not enough to stop the sell-off this afternoon.

Analysts had been cautiously optimistic ahead of the earnings report, with one analyst upping estimates for both the quarter and fiscal year in the past week and helping bring the Zacks Consensus up from 12 cents per share at the start of the quarter. For fiscal 2010, analysts expect 70 cents per share, a 37% jump from what was expected 90 days ago.

Clearly, everyone was hoping for a much bigger surprise, a la Q1’s numbers. CEO Carol Bartz, running a tight ship (and demonstrating her ability to curse like a sailor) was supposed to have Yahoo! turned around and full-steam ahead by now, but it appears the company’s high-profile partnerships — with Samsung, Nokia (NOK) and Sony (SNE), to name a few — and several acquisitions are going to take a bit more time before they are cruising.

In the past month, 2 analysts had upped estimates and one had lowered for the June quarter, as well as September and fiscal 2010 and 2011. Thus, YHOO has earned its short-term Zacks #3 Rank (Hold), which coincides with its longer-term Neutral recommendation from Zacks Equity Research.

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