AOL Profits Down, But Earnings Still Strong

Image via Flickr/ Jason Persse

AOL, Inc. (NYSE:AOL) reported its Q3 earnings today, and it beat the expectations laid out for the company by analysts on the street. According to the report, AOL’s profit is actually down from the third quarter of last year. However, the reason for this lower profit is because the company slashed its operating cost in Patch, its local news arm, and when it made these changes there were restructuring costs involved.

Many investors have been waiting for the Internet giant to cut the costs associated with Patch for quite some time. Because of this, the reduced profit is simply a temporary cramp that will eventually lead to more freedom and larger returns. Once those costs are adjusted for, the company’s profit is up.

Estimates Beaten

Analysts estimated that AOL, Inc. (NYSE:AOL) would earn around $549 million in revenue this past quarter. The actual earnings were $561.3 million, which is a nice increase above expectations.
Adjusted Operating Income Before Depreciation and Amortization (OIBDA)was estimated to come in at $115 million. However, the Internet mogul racked up $119.8 million. These numbers soundly beat even the higher side of analysts’ estimates.

Earnings per share were also higher than expected, coming in at $0.55 per share. The consensus among analysts was an EPS of $0.51.

Profits Down

According to the earnings report, AOL’s profit was down a whopping 90 percent year over year. However, as noted above, the reduced profits are due to the restructuring costs and asset impairments associated with the reduction of expenditure on Patch.

The company said the profit loss came as a result of “pre-tax restructuring costs of $19.0 million as well as $25.0 million related to non-cash intangible asset impairments in our Patch operations.”

AOL Growth

According to the company, AOL has seen growth in several areas over the last quarter. The rundown is as follows:
*All advertising revenue lines have grown for the third consecutive quarter on a year over year basis
*Global advertising revenue has now grown for 10 consecutive quarters on a year over year basis
*Search revenue increased for the 5th consecutive quarter
*Third Party Network revenue up 32 percent on a year over year basis for the 10th consecutive quarter
*Third Party Network revenue up 17 percent year over year, if you do not include Adap.tv
*Brand Group display revenue up 11 percent
*Brand Group finally returns to a positive number in regards to adjusted OIBDA
*AOL properties recorded a 4 percent year over year growth for the 5th consecutive quarter

AOL seems to be quite healthy, and at the moment the stock is trading at $41.79, up $3.07, or 7.93 percent from its opening price.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.