EARNINGS: NetEase Misses Expectations Despite Net Income INCREASE

Although profit increased, NetEase Inc. ‘s (NASDAQ:NTES) net income missed the mean analyst estimate. NetEase.com is a China-based Internet technology company, which is engaged in the development of applications, services, and other technologies for the Internet in China.

Investing Insights: Is TV the Next Bullish Catalyst for Apple’s Stock?

NetEase Earnings Cheat Sheet for the Second Quarter

Results: Net income for NetEase Inc. rose to $1.01 billion (27 cents per share) vs. $850.3 million (24 cents per share) in the same quarter a year earlier. This marks a rise of 18.6% from the year-earlier quarter.

Revenue: Rose 12.7% to $2 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: NetEase Inc. fell short of the mean analyst estimate of $1.07 per share. It beat the average revenue estimate of $310.2 million.

Quoting Management: William Ding, Chief Executive Officer and Director of NetEase, stated, “We place great emphasis on setting standards of excellence for China’s Internet audience. The merits of this strategy can be found in our continued growth and loyalty in our user base. For the second quarter of 2012, our total revenues increased 12.7% year-over-year, with online games growing by 10.8% and advertising services increasing by 20.4%. In the second quarter, we continued to advance our self-developed games with certain standout performances. Ghost achieved record revenue in May, gaining traction from its open beta testing launch in April. Fantasy Westward Journey demonstrated a stable increase in revenue driven by positive user response to new content for this game. During the second quarter, we also launched open beta testing for Tianxia III, as well as released new expansion packs for Warsong of Westward Journey in April, Heroes of Tang Dynasty in May and Westward Journey Online II at the end of June. We expect the effect from the new launches for our self-developed games to be reflected in upcoming periods.”

Key Stats:

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by 12 cents, and in the fourth quarter of the last fiscal year, it was ahead by 6 cents.

Looking Forward: The average estimate for the third quarter is steady at $1.14 a share. For the fiscal year, the average estimate has moved up from $4.46 a share to $4.59 over the last ninety days.

Competitors to Watch: Sohu.com Inc., Baidu.com, Inc., SINA Corporation, Giant Interactive Group Inc, Perfect World Co., Ltd., Shanda Interactive Entertainment Ltd ADR, The9 Limited, Shanda Games Limited, and China Telecom Corp. Ltd.

Stocks with improving earnings metrics are worthy of your extra attention. In fact, “E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our CHEAT SHEET investing framework for this very reason. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

Don’t Miss These Additional Hot Stories:

Is Disney’s Stock a Buy?

Here’s How to Invest According to Paul Ryan’s Philosophy>>

Is GE Stock a Buy, Sell, or Hold?