Earnings: Margins Suffer for Five Quarters Straight, Profit Drops

Rising costs hurt Inc. (NASDAQ:SOHU) in the third quarter as profit dropped from a year earlier. is an Internet company that, through its subsidiaries, provides online products and services with news, information, entertainment and communication in China.

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Results: Net income for Inc. fell to $25.9 million (63 cents per share) vs. $46.8 million ($1.17 per share) a year earlier. This is a decline of 44.7% from the year-earlier quarter.

Revenue: Rose 22.6% to $285.4 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Inc. beat the mean analyst estimate of 42 cents per share. It beat the average revenue estimate of $248.3 million.

Quoting Management: Dr. Charles Zhang, Chairman and CEO of Inc. commented, “We are pleased with the solid financial results we achieved in the third quarter. Total revenues surpassed our expectations, rising 23% year-on-year. Brand advertising revenues met the high end of our guidance and online gaming revenues came in well ahead of our expectations.”

Key Stats:

The company has seen double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 33.1%, with the biggest boost coming in the fourth quarter of the last fiscal year when revenue rose 42.2% from the year earlier quarter.

The company has now seen net income fall for four straight quarters. In the second quarter, net income fell 71.1% while the figure fell 48.4% in the first quarter and 38.9% in the fourth quarter of the last fiscal year.

The company topped expectations last quarter after falling short of forecasts in the second quarter with net income of 32 cents versus a mean estimate of net income of 40 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from 68 cents per share to 50 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At $1.82 per share, the average estimate for the fiscal year has fallen from $2.30 ninety days ago.

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

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