The 10-second takeaway
For the quarter ended Dec. 31 (Q4), EarthLink met expectations on revenues and crushed expectations on earnings per share.
Compared to the prior-year quarter, revenue expanded significantly, and GAAP earnings per share stayed the same.
Margins shrank across the board.
EarthLink logged revenue of $350.2 million. The five analysts polled by S&P Capital IQ predicted sales of $349.2 million on the same basis. GAAP reported sales were much higher than the prior-year quarter's $166.8 million.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
Non-GAAP EPS came in at $0.08. The three earnings estimates compiled by S&P Capital IQ predicted $0.06 per share on the same basis. GAAP EPS of $0.04 were the same as the prior-year quarter.
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 54%, 730 basis points worse than the prior-year quarter. Operating margin was 9.1%, 1,580 basis points worse than the prior-year quarter. Net margin was 1.2%, 200 basis points worse than the prior-year quarter.
Next quarter's average estimate for revenue is $342.6 million. On the bottom line, the average EPS estimate is $0.06.
Next year's average estimate for revenue is $1.33 billion. The average EPS estimate is $0.18.
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 281 members rating the stock outperform and 82 members rating it underperform. Among 103 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 81 give EarthLink a green thumbs-up, and 22 give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on EarthLink is buy, with an average price target of $12.68.
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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. 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.