NetEase Beats on Both Top and Bottom Lines

NetEase (Nasdaq: NTES  ) reported earnings on Feb. 6. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), NetEase beat expectations on revenues and beat expectations on earnings per share.

Compared to the prior-year quarter, revenue increased and GAAP earnings per share increased.

Gross margins grew, operating margins shrank, net margins expanded.

Revenue details
NetEase booked revenue of $364.5 million. The 10 analysts polled by S&P Capital IQ expected a top line of $350.2 million on the same basis. GAAP reported sales were 9.4% higher than the prior-year quarter's $333.0 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $1.23. The nine earnings estimates compiled by S&P Capital IQ predicted $1.09 per share. GAAP EPS of $1.23 for Q4 were 15% higher than the prior-year quarter's $1.07 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 70.8%, 160 basis points better than the prior-year quarter. Operating margin was 45.3%, 110 basis points worse than the prior-year quarter. Net margin was 44.4%, 160 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $338.9 million. On the bottom line, the average EPS estimate is $1.17.

Next year's average estimate for revenue is $1.51 billion. The average EPS estimate is $4.81.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 1,119 members out of 1,158 rating the stock outperform, and 39 members rating it underperform. Among 303 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 295 give NetEase a green thumbs-up, and eight give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on NetEase is outperform, with an average price target of $60.63.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool recommends NetEase.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On February 07, 2013, at 1:37 PM, lilizhr wrote:

    As I read, operating margin in the 4Q 12 also expanded from the year-ago period. It was 45.3% versus 44%, so it was 130 basis points higher. It was a decent quarter---sales and earnings per share were better than consensus and margins were all improved.

  • Report this Comment On February 09, 2013, at 7:15 PM, crca99 wrote:

    YOY revenue growth is 9% and EPS growth is 15%. Perhaps the scale of the graphs could be adjusted to make proportions more obvious. thanks.

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