Valentines Day Photo Book Shutterfly

Image Source: Shutterfly.

What happened 

Shares of Shutterfly Inc. (NASDAQ:SFLY) were surging higher Thursday as the online photo specialist topped estimates in its third-quarter report. As of 11:22 a.m. EDT, the stock was up 11.4%.

So what 

The company, which provides services for organizing and printing photos and photo albums and other such mementos, said its net loss per share improved from -$1.73 a year ago to -$0.86, better than estimates at -$0.96, while revenue increased 12% to $187.3 million, ahead of expectations at $183.5 million.

There were additional signs the company was moving in the right direction as Business Solutions revenue jumped 47% and gross margin improved 160 basis points to 37.1%.

CEO Christopher North said, "We delivered a solid performance in the third quarter," and noted the completion of the two significant projects-migrating its most active customers to the company's cloud management service and an update to the mobile app.

Now what

Not surprisingly, since a lot of Shutterfly's products serve as gifts, the fourth quarter is its most profitable of the year. In fact, the company operates at a loss the rest of the year, but makes up for it during the holiday season.

For the current quarter, management sees a per-share profit of $2.57 to $2.86, in line with the consensus at $2.73, and a modest increase in revenue to $557 million-$587 million. That profit is down from a year ago when it posted EPS of $3.57, but the company is on track for its best year since 2013. With Business Solutions revenue revving and its consumer-based business posting moderate growth, profits should continue to improve from here.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.