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WebMD is
scheduled to report their fourth quarter 2008 results after the
market closes on Thursday, February 19. Based on our analysis,
we at
eChristianInvesting are expecting WBMD to report inline
results that meet Wall Street’s expectations.
Analyst
Expectations
We are
forecasting revenues of $105.0 million and EPS of $.18. This
would represent a 9% increase in revenues from last year’s $96.6
million in the same period. The current analyst consensus calls
for revenues of $105.8 million and $.18 EPS. On October 30, the
company provided fourth quarter guidance for revenues of $104 –
108 million and $.16 - .19 EPS.
Management
reaffirmed their guidance estimates in December and then again
in January. So we feel very comfortable that the company will be
able to meet Wall Street’s expectations for the quarter. Our
checks show strong traffic growth during the quarter which would
further confirm this assumption.
While the
company’s online advertising revenues have held up better than
their peers, management has also been proactive in reducing
their cost structure. In December, they announced headcount
reductions equal to 4-5% of their employee base.
Looking
ahead to 2009, Wall Street is anticipating revenues to be at the
low end of the $420 – 450 million guidance that it provided
during the last earnings call. While management may narrow the
top-end of the range, we would be surprised if they lowered the
bottom end. This is a company that will continue to post double
digit growth even in this current economic environment.
Share
Performance
WebMD’s
shares have dropped 12% since the beginning of the year. In
2008, the shares dropped 43% inline with the 41% drop in the
Nasdaq.
Valuation
Shares are
now trading at 34x consensus 2009 EPS estimates. This represents
a healthy premium to their peer group. We would expect the stock
to post a modest gain following the quarterly results
announcement.
Recommendation:
Buy with a $21 price target.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
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