Shutterfly 3Q Loss Narrows, View Up - Analyst Blog
November 05 2012 - 3:00AM
Zacks
Shutterfly Inc.
(SFLY) has reported a loss of 29 cents per share for the
third-quarter of 2012 which is narrower than the Zacks Consensus
Estimate of a loss of 41 cents per share. The loss per share came
at par with the year-ago level.
In the quarter under review, net revenue increased 29% year over
year to $98.5 million which was significantly ahead of the Zacks
Consensus Estimate of $91.0 million, induced by the sturdy sales
from the Consumer category.
Healthy customer and transaction growth across all four of
lifestyle brands, sustained growth in enterprise revenue and some
contribution from new Kodak customers drove revenue in the
quarter.
Behind the Headline Numbers
Revenues from the Consumers’ category were $90.4 million in the
quarter, up 24% over the prior-year quarter. Net Enterprise
revenues nearly doubled to $8.1 million in this quarter.
The total number of customers was 2.2 million in the quarter,
reflecting an increase of 40% from the prior-year quarter. Total
orders generated were 3.6 million, up 40% year over year. Average
order value was $25.06, down 11% year over year.
Gross profit margin declined 150 basis points to 44.1% from the
prior-year quarter mainly due to a lease termination fee related to
the pending move of the East Coast production facility and higher
customer service costs owing to the Kodak Gallery migration.
Liquidity
Shutterfly exited the quarter with cash and cash equivalents of
$89.9 million. The total shareholders’ equity remains around $630.6
million in the reported quarter.
Outlook
For the fourth quarter of 2012, Shutterfly expects net revenue in
the range of $300.0 million to $310.0 million. The company expects
GAAP diluted earnings of 94 cents to $1.02 per share.
For fiscal 2012, Shutterfly expects net revenue to range between
$589—$599 million ($582—$592 million predicted earlier).
Management, in its preceding two quarters as well, had boosted its
full-year revenue guidance.
On GAAP basis, earnings are estimated to be in between 14 cents and
24 cents per share (11 cents and 21 cents estimated previously).
Prior to this quarter, it raised full-year earnings guidance from
11—21 cents.
Our Take
Shutterfly has recently been very active on inorganic expansion.
Some of Shutterfly’s recently clinched deals like the takeover of
the online photo services from FujiFilm and Eastman Kodak, along
with the acquisition of Penguin digital and Photoccino will likely
prove beneficial for the company over the long-term. The company
announced that it would triple the East Coast manufacturing
operations by opening a new unit at South Carolina. This move also
affirms the company’s strong growth trajectory. Management sees
several opportunities ahead as the social expression and personal
publishing markets are still blooming. Additionally, with the
holiday season on the way, the upcoming quarter is seasonally the
strongest.
However, challenging economic conditions as well as competitive
pressures pose a threat to the company’s margin expansion.
Shutterfly Inc. competes with companies like LookSmart
Ltd. (LOOK), Snapfish owned by Hewlett-Packard
Co. (HPQ) and Photoworks and Webshots brands of
American Greetings Corp. (AM). Shutterfly
currently retains a Zacks #2 Rank, which translates into a
short-term ‘Buy’ rating.
AMER GREETINGS (AM): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis Report
LOOKSMART LTD (LOOK): Free Stock Analysis Report
SHUTTERFLY INC (SFLY): Free Stock Analysis Report
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