SINA Corp. (SINA) is set to announce its financial results for the third quarter of 2010 on November 16, after the market closes.
Headquartered in Shanghai, China, SINA is a leading provider of online media and value-added information services to global Chinese communities.
Second Quarter Highlights
SINA’s second quarter 2010 results, announced in August, were strong. Earnings spiked up 56.5% year over year to 40 cents per share.
Second quarter 2010 earnings exceeded the Zacks Consensus Estimate by 38.0%, aided by an improvement in the online advertising business, robust portal business and increased users due to FIFA World Cup 2010.
Strong growth was primarily driven by a solid revenue boost and robust gross margin expansion. Earnings include stock-based compensation expenses but exclude one-time items. Earnings on a GAAP basis leaped 67.9% year over year to 38 cents per share, driven primarily by operating margin growth.
Revenues on a non-GAAP basis increased 17.5% year over year to $94.7 million in the quarter. GAAP revenues escalated 10.1% year over year to $99.4 million.
Strong revenue growth was primarily driven by higher advertising revenues. Advertising revenues were $73.1 million, an increase of 52.0% year over year, while non-advertising revenues plummeted 33.4% year over year to $21.6 million in the quarter.
Third Quarter Outlook
During the second quarter earnings release, management said that non-GAAP revenues are expected to be in the range of $101.0 million to $104.0 million for third quarter 2010.
For the third quarter, advertising revenues are expected in the range of $80.0 million to $82.0 million, reflecting an increase of 48.0% to 52.0% year over year. Non-advertising revenues are expected to be in the range of $21.0 million to $22.0 million, reflecting a decrease of 3.0% to an increase of 2.0% sequentially.
However, the company did not provide an earnings forecast.
Estimate Revision
The current Zacks Consensus Estimate for the third quarter is 40 cents, which has seen no revision in the last three months. It is an increase of 37.9% from the same quarter last year. We do not see any surprises this quarter, with earnings expected to be in line with the current Zacks Consensus Estimate.
The Zacks Consensus Estimate for the full-year 2010 earnings dipped 1 cent to $1.46 per share, in the last three months. Estimates for the fourth quarter 2010 are down 2 cents to 40 cents.
Our Take
SINA’s online advertising business has a competitive edge based on its popularity in China, superior brand recognition and persistent marketing innovations.
SINA’s robust operating margins and strong net cash position are encouraging. A recovering economy, surge in Internet users and robust Chinese advertising market will drive strong top line and bottom line growth in fiscal 2011.
However, competition from major portals such as Sohu Corp. (SOHU), Tencent and Baidu Inc. (BIDU) and sluggish growth from mobile value-added services remain areas of concern.
We maintain our long-term Neutral rating on SINA. The lack of revisions in the Zacks Consensus Estimate, in either direction, is reflected by its Zacks #3 Rank (short-term Hold rating).
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