Zacks Analyst Blog Highlights: Ford Motor, United Continental Holdings, Delta Airlines, Monster Worldwide and Yahoo!

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Jan 31, 2011, 09:30 ET

CHICAGO, Jan. 31, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features: Ford Motor Co. (NYSE: F), United Continental Holdings Inc. (NYSE: UAL), Delta Airlines (NYSE: DAL), Monster Worldwide, Inc. (NYSE: MWW) and Yahoo! Inc. (Nasdaq: YHOO).

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Here are highlights from Friday's Analyst Blog:

Ford Slips, Shows Year-Long Strength

Ford Motor Co. (NYSE: F) posted a 24% fall in profit to $1.2 billion or 30 cents per share (before special items) in the fourth quarter of 2010 from $1.58 billion or 43 cents per share (before special items) in the same quarter of 2009. With this, the automaker has missed the Zacks Consensus Estimate by 19 cents per share.

The decline in profit was attributable to lower year-over-year revenues generated by the company's automotive operations as well as the financial arm. Total revenue during the quarter ebbed 7% to $32.5 billion. However, excluding revenues from Volvo, sales improved by $1.6 billion or 5% from the fourth quarter of 2009.

Outlook

For full year 2011, Ford expects industry volume (including medium and heavy trucks) of 13 million units–13.5 million units in the U.S. and 14.5 million units–15.5 million units in the 19 European markets covered by it.

In 2010, Ford continues to expect its structural costs in the Automotive division to be higher on a year-over-year basis in order to support higher production and new investments.

The company also anticipates commodity costs to be higher on the back of magnified global demand. Capital expenditures is expected in the range of $5 billion to $5.5 billion as the company continues to invest in its product and growth plans.

For 2011, Ford expects profits at Ford Credit to be lower than 2010 due to the non-recurrence of lower lease depreciation expense and that of reductions in credit loss reserve of the same magnitude as in 2010.

Our Take

We appreciate Ford's product plans and debt reduction strategy. The benefits from these strategies have already been reflected in the company's results. However, we are concerned about the company's higher structural and commodity costs. As a result, the company retained a Zacks #3 Rank on its stock, which translated to a short-term (1–3 months) rating of Hold.

United Continental Doubles Estimate

United Continental Holdings Inc. (NYSE: UAL), the largest U.S. airline, reported fourth quarter adjusted earnings of 44 cents per share, exactly twice the Zacks Consensus Estimate. Adjusted earnings showed a whopping increase from a loss of 60 cents in the year-ago quarter. Despite higher fuel prices, earnings improved on increased fares and traffic, and a revival in the airline industry.

Adjusted earnings exclude $485 million of special items related to merger-related costs and other one-time charges. Fiscal 2010 earnings were $4.30 per share compared with a loss of $3.89 per share in prior year.

After the merger of Continental Airlines with UAL Corp. on October 1, 2010, the company reported consolidated results of the two operating subsidiaries, United Airlines and Continental Airlines for the first time. The merger created the world's largest airline, overtaking Delta Airlines (NYSE: DAL), which acquired Northwest Airlines in 2008.

Revenue

Total revenue climbed 15% year over year to $8.43 billion in the fourth quarter and was ahead of the Zacks Consensus Estimate of $8.35 billion driven by higher ticket prices. On an annualized basis, Passenger revenue, Cargo and Other revenues showed increases of 15.8%, 13.6% and 8%, respectively.

Airlines traffic, measured in revenue passenger miles, climbed 4% year over year on the capacity or available seat miles growth of 3.8%. Load factor (percentage of seats filled with passengers) rose 100 basis points year over year to 82%.

Fiscal 2010 revenue was $34 billion, up 18.9% year over year on a marginal capacity increase of 1.1% as well as load factor increase of 190 bps.

Operating Expenses

Total operating expenses, excluding special items, increased 10.2% and 9.5% year over year in the fourth quarter and fiscal 2010, respectively. Steeper expenses were largely due to a respective 17.6% and 27% year over year rise in fuel price in the fourth quarter and fiscal 2010, excluding the impact of hedges.

In the fourth quarter, consolidated unit cost or cost per available seat mile (CASM), excluding fuel and special items, upped 1.8% year over year. CASM, excluding special items, grew 6.1% from the year-ago quarter.

Liquidity

The company ended 2010 with cash equivalents including short-term investments of $8.7 billion. United Continental generated operating cash flow of approximately $106 million and spend approximately $257 million during the reported quarter.

Our Analysis

We believe the improving demand for air travel, revival in the airline industry, tight capacity, industry leading unit revenue growth, fleet right-sizing, network optimization, hedging strategy as well as the merger benefits from Continental Airlines bode well for United Continental's future growth.

The company is expected to generate net annual synergies of $1 to $1.2 billion by 2013, with $800 to $900 million in additional revenue and $200 to $300 million in cost savings. However, the time-taking integration of the two companies, competitive threats and unionized workforce might be the downside. Further, the rising fuel prices might stall the ongoing revival in the airline industry.

We are currently maintaining our long-term Neutral recommendation on United Continental, supported by the Zacks #3 Rank (Hold).

Monster Misses Expectations

Monster Worldwide, Inc. (NYSE: MWW), the parent company of Monster.com, reported revenues of $255 million, up 19.7% from the year-ago quarter and up 11.4% sequentially, but missed the Zacks Consensus Estimate of $264 million. The reported figure includes a $3.3 million purchase accounting adjustment related to the HotJobs acquisition.

Excluding the purchase accounting adjustment, Monster generated revenues of $258 million, up 21% year over year. Currency translation had a $3 million negative impact on revenue in the fourth quarter.

Bookings (which represent the dollar value of contractual orders received) increased 28% year over year to $330 million. Management stated that a number of other factors made the company lose $5 million in bookings leading to the revenue miss.

Monster completed the acquisition of HotJobs from Yahoo! Inc. (Nasdaq: YHOO) in August 2010. The other factors included inclement weather in Europe and Northeastern United States impacting business. Also, as the U.S. government did not approve the budget, a number of governmental contracts were not consummated. Some of those contracts were pushed to the future quarters while some of the short-term contracts were lost.

Careers revenue came in at $226 million, up 26% year over year. North America generated revenues of $124 million, up 37% year over year. Careers-International revenue increased 15% to $102 million. Internet Advertising & Fees revenue of $32 million was down 4% year over year.

The company's new service offerings -- Power Resume Search (PRS) and Career Ad Network -- continue to gain traction. PRS has already been launched in America and United Kingdom. In 2011, Monster plans to launch PRS in other countries around the world.

Margins: Excluding one-time items, operating margin came in at 4.6%, up from 2.4% in the previous quarter. Operating expenses grew 16% year over year primarily reflecting the inclusion of HotJob's expenses.

Monster reported breakeven earnings in the quarter compared to a net loss of $2 million or 2 cents per share in the year-ago quarter and a net loss of $5.7 million or 5 cents per share in the previous quarter.

Excluding special items, Monster posted a net income of $7.0 million or 6 cents per share, in line with the Zacks Consensus Estimate.

As of December 31, 2010, deferred revenue was $376 million, up 20% sequentially and up 23% year over year. Excluding the contribution from HotJobs, the deferred revenue balance was $299 million, up from $280 million reported at the end of the previous quarter. Monster expects that deferred revenue will be significantly higher at year-end.

Deferred revenue was $376 million, a 20% sequential increase and a 23% increase compared to last year's numbers.

For 2010, Monster reported revenues of $914 million, up 0.1% year over year. Excluding purchase accounting adjustments, revenues came in at $919 million. Monster reported a net loss of $32 million or 27 cents per share compared to a net income of $19 million or 16 cents per share.

Guidance: Management stated that the macro environment is very uncertain and unemployment continues to be significantly high. However, management stated that clients around the world have increased budgets for recruiting and are beginning to increase their hiring.

Going forward, Monster expects that bookings will grow between 20% and 25% to $1,191 million – $ 1,241 million in 2011. Revenues are projected at $1,103 million – $1,149 million in 2011, up 20% – 25% year over year. Earnings per share are forecasted in the range 36 cent to 48 cents.

For the first quarter, Monster expects bookings between $259 million and $269 million, up 18% – 23% year over year. Revenues are projected between $254 million and $265 million, up 18% – 23% year over year, below the Zacks Consensus Estimate is $270 million. Earnings per share are forecasted in the range 1 cent to 4 cents.

Monster forecasts $30 million of one-time acquisition and integration costs related to HotJobs and it has incurred $24 million of the estimated $30 million and expects to incur the major chunk of the remaining in the first quarter.

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