After the closing bell Tuesday, Yahoo! Inc. (YHOO) posted modest earnings and revenue beats for the company’s 4th quarter of 2010. Earnings per share reached 24 cents, topping the Zacks Consensus Estimate of 22 cents by 9.1%, and revenues of $1,205 million in the quarter (after traffic acquisition costs, or TAC) beat the Zacks estimate by a modest 1.4%.
Year over year, things look much more impressive on the EPS side. The 24 cents per share was a 120% improvement from Yahoo’s 11 cents in Q409. For sales, Yahoo! actually performed 4% better a year ago, bringing in after-TAC revenues of $1,258 million.
The reason for this discrepancy has to do with the revenue sharing Yahoo! now does with Microsoft Corp. (MSFT) in regards to the companies’ recently completed Search Agreement. According to Yahoo!, the company has successfully transitioned to Microsoft’s search platform (for the U.S. and Canada) in the 4th quarter.
The company also considers its transition costs from the Search Agreement to have had a neutral net impact on total operating expenses in the quarter. What’s more, in the longer term both Yahoo! and Microsoft are hopeful their Search Agreement will show signs of winning share in the overall search market.
Among the year-over-year highlights cited by Yahoo! are a 16% increase in display revenue (ex-TAC) and a doubling of its operating margin from 7% to 14%.
Analysts, for their part, have mostly been sitting on their hands for Yahoo! this quarter. The 22 cents per share EPS estimate that makes up the Zacks Consensus from 29 analysts covering Yahoo! is exactly what it has been all quarter. Five analysts had bumped estimates up for the quarter in the past week, but not enough to register any change in the estimate.
Traders sold Yahoo! by 7 cents (-0.44%) per share prior to the closing bell, and since the earnings announcement, YHOO shares are down an additional 45 cents per share (-2.81%).
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