What happened

Shares of MercadoLibre (NASDAQ:MELI) surged as much as 22.4% higher on Wednesday morning, driven by a strong fourth-quarter earnings report. As of 3 p.m. EST, the Latin American e-commerce specialist's stock had settled down to a 19% gain.

So what

MercadoLibre's fourth-quarter sales fell 2% year over year to land at $428 million. Your average Wall Street analyst would have settled for $410 million. On the bottom line, the company reported an unadjusted net loss of $0.05 per share. Here, the Street consensus had been pointing to a larger $0.13 loss per share.

Two young Latin American people discuss business over a shared laptop.

Image source: Getty Images.

Now what

The company reduced its free shipping offers and capped its free-item listing volumes in the fourth quarter, leading the way toward renewed bottom-line profits after a few lean years. The fact that MercadoLibre managed to beat Wall Street's revenue targets while focusing on wider operating margins is a good sign for future results. And the MercadoPago payment system is hitting its stride, managing over $5 billion of total payments in a single quarter for the first time. It's no surprise to see investors embracing MercadoLibre's strong results today.

Check out the latest MercadoLibreearnings call transcript.