Netflix Inc. Earnings: Increasing Costs Tighten Margins as Net Income Falls

Rising costs hurt S&P 500 (NYSE:SPY) component Netflix Inc. (NYSE:NFLX) in the fourth quarter as profit dropped from a year earlier. Netflix provides subscription service, streaming movies, and TV episodes over the Internet.

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Netflix Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for the music and video store fell to $40.7 million (73 cents per share) vs. $47.1 million (87 cents per share) a year earlier. This is a decline of 13.5% from the year earlier quarter.

Revenue: Rose 46.9% to $875.6 million from the year earlier quarter.

Actual vs. Wall St. Expectations: NFLX beat the mean analyst estimate of 55 cents per share. It beat the average revenue estimate of $857.6 million.

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 45.4%, with the biggest boost coming in the second quarter when revenue rose 51.7% from the year earlier quarter.

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the third quarter, net income rose 64.5% from the year earlier, while the figure increased 56.7% in the second quarter, 86.6% in the first quarter and 52.3% in the fourth quarter of the last fiscal year.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 21 cents in the third quarter, by 15 cents in the second quarter, and by 4 cents in the first quarter.

Gross margin shrank 0.1 percentage point to 34.3%. The contraction appeared to be driven by increased costs, which rose 47.2% from the year earlier quarter while revenue rose 46.9%.

Looking Forward: Analysts seem more negative about the company’s results for the next quarter than ninety days ago. The average estimate for the first quarter of the next fiscal year has moved from a loss of 4 cents a share to a loss of 22 cents over the last ninety days. For the fiscal year, the average estimate has moved down from $4.14 a share to $4.07 over the last ninety days.

Competitors to Watch: Blockbuster Inc. (BLOAQ), Coinstar, Inc. (NASDAQ:CSTR), DISH Network Corp. (NASDAQ:DISH), Comcast Corporation (NASDAQ:CMCSA), Time Warner Inc. (NYSE:TWX), The Walt Disney Company (NYSE:DIS), Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), Google Inc. (NASDAQ:GOOG), and Time Warner Cable Inc. (NYSE:TWC).

Investing Insights: Will the iPad 3 Be the Next Catalyst for Apple’s Stock?

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

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com