Yhoo

Dig into the numbers that would have Yahoo! employees celebrating. Source: Yahoo.

Shares of Yahoo! (NASDAQ:YHOO) are down more than 30% year to date. Will the losses continue, or are better days ahead?

A lot depends on how well the business performs. Here's a closer look at what analysts expect to see when the company reports fiscal first-quarter 2016 earnings next week:

Q3 Estimates
Revenue
YOY Growth
EPS
YOY Growth

Low estimate

 $999.59 million  (8.6%)  $0.10  (80.8%)

High estimate

 $1,052 million  (3.8%)  $0.21  (59.6%)

S&P CAPITAL IQ CONSENSUS

 $1,024.48 million

 (6.4%)

 $0.16

 (69.2%)

Source: S&P Capital IQ

Looking at recent history, a beat would be a welcome change. Earnings have mostly deteriorated during the past four quarters. Not exactly the pattern we like to see from a turnaround growth story:

Earnings History
FQ3 2014
FQ4 2014
FQ1 2015
FQ2 2015

Consensus

 $0.32

  $0.30

  $0.18  $0.18

Actual

 $0.52    $0.30   $0.15  $0.16

DIFFERENCE

 $0.20

  $0.00

 ($0.03)

($0.02)

Source: S&P Capital IQ.

Looking at the overall business, I'm watching for momentum in each of these four areas:

1. Mobile revenue growth. CEO Marissa Mayer has made no secret of her bets on mobile technology. The thinking is that mobile users who delight on Yahoo apps will be more likely to accept ads and offers. Also, as users, it's fair to say we spend as much or more time with our devices as we do our families. In Q2, Yahoo reported more than $250 million in mobile revenue when measured by generally accepted accounting principles (GAAP), up 55% year over year. 

2. Investments in originals. When I say "originals," I don't just mean television shows such as Community and Other Space. Rather, I'm talking about every property that Yahoo invests in that carries original content of some sort. Most recently, that included the launch of Yahoo Real Estate and Yahoo Celebrity. Yahoo also has a deal with the NFL to live stream some football games, which should help boost income from its Fantasy Sports products. Less clear is what it costs to bring these products to life. In the Q3 call and press release, look for Mayer to provide some details on how content impacts results.

3. Traffic patterns. Mayer likes to compare Yahoo to other big names by pointing out that her company's various properties combine to serve more than 1 billion users around the globe. That's great, but are we using Yahoo more? Revenue growth is entirely dependent on how much time and effort they put into using the company's various products and services. In Q2, the mobile user base was up 14% year over year. Yahoo didn't give an overall figure for traffic growth. 

4. Better insight into cash flow and capital expenditures. Read enough Yahoo transcripts, and you'll see Mayer make mention of making progress across "people, products, traffic, and revenue." As an investor, I also want to see what a more stripped-down Yahoo looks like in terms of organically generated cash flow for reinvesting in products, like the new password-free Yahoo Mail. More products increases the odds of high engagement, which in turn boosts Yahoos ad revenue and growth profile. Cash from operations came in at $289.2 million in last year's third quarter, S&P Capital IQ reports. 

Yahoo reports third-quarter results on Oct. 20 after the market closes.

Tim Beyers may be a Fool, but he's no yahoo. He's also a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission and owned shares of Apple at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool.

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