Earnings Scorecard: MWW Q1 2010 – Analyst Blog

Monster Worldwide Inc. (MWW) reported a smaller net loss in the first quarter of 2010 on April 29, 2010, compared to our expectations. Net loss came in at $24 million or 20 cents per share, compared to a loss of $10 million or 9 cents in the year-ago quarter. Excluding one-time items, Monster reported a net loss of 14 cents, lower than the Zacks Consensus Estimate of 16 cents.

 

Let us now take a detailed look at the earnings announcement, subsequent analyst estimate revisions and Zacks ratings for the short term and long term outlook for the stock.

 

 

Although revenues were down 16% year over year in the first quarter, this was the lowest percentage decrease in the last five quarters. The results beat management expectations and mark the first sequential increase since the first quarter of 2008. Management saw solid improvement across all key geographies and all sales channels. Bookings growth was better than anticipated as a result of the improved global economy.

 

However, operating expense increased 12% year over year in the quarter primarily due to seasonal higher advertising and employee benefits expense.

 

We have discussed the results in detail here: Loss Narrows at Monster

 

 

Analysts covering the stock on the Street seem to have a mixed view on the stock. Although the company reported a smaller loss compared to estimates, the outlook was disappointing.

 

Management projects revenues at $890 – $925 million for 2010. Operating expenses are projected to increase around 3%-6% on a year-over-year basis. Loss per share is forecasted between 12 cents and 20 cents. For the second quarter, revenues are projected between $210 million and $220 million, down 2% – 6% year over year. Loss per share is forecasted at 2 cents to 6 cents.

 

 

For 2010, six out of the thirteen analysts covering the stock have raised their estimates while three analysts have decreased their estimates. Negative revisions reflect analysts’ concerns over revenue declines in Europe and a continued rise in operating expenses.

For 2011, five out of the sixteen analysts covering the stock have raised their estimates while three analysts have decreased their estimates.

 

The sentiment is strongly negative for the near-term as eight out of the fifteen analysts covering the stock have downgraded their estimates for the June quarter. Although the economy shows signs of recovery, it is going to be slow and we believe that the momentum should pick up in late 2010-early 2011 only.

 

 

Not only have the revisions in estimates following the first-quarter results lacked directional view, but the magnitude of revisions was also not impressive.

Although there were more upward revisions for 2010 than downward in the last 30 days, the consensus estimate is down by a cent. Management is taking steps to revive growth but it will be some time before the business starts showing meaningful growth.

 

For 2011, the current Zacks Consensus Estimate is 26 cents, down two cents in the last thirty days. This was in part due to the disappointing outlook provided by management even though the business environment is improving.

 

The worldwide slowdown has caused companies to reduce headcount, freeze hiring and delay recruitment-related decisions. Management has been attempting to improve its technology to enhance the experience of both job seekers and corporate clients. The recent acquisition of HotJobs should provide inroads to the small and medium size businesses.

 

Bookings were strong for the quarter. Though the economy is showing signs of recovery, it is slow. Meanwhile, competition also continues to pace up as alternative social interaction sites like Linkedln, Facebook and Twitter continue to gain traction and seize business.

 

With operating expenses projected to increase in the coming quarters, margins should remain under pressure. The company is not expected to return to profitability before 2011.

 

As of now, we maintain a NEUTRAL rating on the stock, which is supported by the Zacks Rank #3.

Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/