Sina Corp Earnings Cheat Sheet: Increased Costs Strains Margins

Sina Corporation (NASDAQ:SINA) reported a drop to a loss in the third quarter driven by higher costs. SINA is an online media company and mobile value-added information service provider in the People’s Republic of China and the global Chinese communities.

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Sina Earnings Cheat Sheet for the Third Quarter

Results: Reported a loss of $336.3 million ($5.10 per diluted share) in the quarter. Sina Corporation had a net income of $31.3 million or 48 cents per share in the year earlier quarter.

Revenue: Rose 20.4% to $130.3 million from the year earlier quarter.

Actual vs. Wall St. Expectations: SINA reported adjusted net income of 26 cents per share. By that measure, the company beat the mean estimate of 16 cents per share. It beat the average revenue estimate of $124.7 million.

Quoting Management: “Since the official launch of Weibo.com v4.0 in September, over half of the existing users have upgraded, and we continue to see rapid growth of new users. Our focus now turns to adding more social networking features to Weibo to increase user stickiness,” said Charles Chao, CEO of SINA. “For the third quarter, SINA’s online brand advertising revenues reached a new high, for the first time exceeding over $100 million per quarter,” Mr. Chao added.

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 16.4%, with the biggest boost coming in the most recent quarter when revenue rose 20.4% from the year earlier quarter.

Gross margin shrank 3.5 percentage points to 56.1%. The contraction appeared to be driven by increased costs, which rose 30.7% from the year earlier quarter while revenue rose 20.4%.

The company beat estimates last quarter after falling short in the previous two quarters. In the second quarter, it missed the mark by 3 cents, and in the first quarter, it fell short by 2 cents.

The company’s loss in the latest quarter follows profits in the previous two quarters. The company reported a profit of $10 million in the second quarter and a profit of $15 million in the first quarter.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the fourth quarter is 16 cents per share, down from 26 cents ninety days ago. For the fiscal year, the average estimate has moved down from 88 cents a share to 68 cents over the last ninety days.

Competitors to Watch: Sohu.com Inc. (NASDAQ:SOHU), Baidu.com, Inc. (NASDAQ:BIDU), Google Inc. (NASDAQ:GOOG), Yahoo! Inc. (NASDAQ:YHOO), NetEase.com, Inc. (NASDAQ:NTES), Youku.com Inc (NYSE:YOKU), Shanda Interactive Entertainment Ltd ADR (NASDAQ:SNDA), Rediff.com India Ltd. (NASDAQ:REDF), and AOL, Inc. (NYSE:AOL).

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