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Facebook (FB) Q4 Earnings Up Y/Y on Strong Revenues & MAUs
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Facebook reported fourth-quarter 2017 earnings of $1.44 per share, which improved 19.1% from the year-ago quarter.
Excluding tax-related adjustments of 77 cents related to the enactment of the 2017 Tax Cuts and Jobs Act (the Tax Act) earnings were $2.21. The Zacks Consensus Estimate was pegged at $1.96.
Revenues of $12.97 billion handily beat the Zacks Consensus Estimate of $12.58 billion and surged 47.5% from the year-ago quarter. Excluding the impact of year-over-year changes in foreign exchange rates revenues jumped 43.5%.
Updates Impacted User Engagement in Q4
Facebook is focused on improving “conversation” and strengthen “connections” among friends. However, the company’s efforts to limit public content, news and video, affected Daily Active Users (DAUs) in its most penetrated market — the United States and Canada — in the reported quarter.
On the fourth-quarter conference call, Facebook CEO Mark Zuckerberg clearly stated that “helping people connect is more important than maximizing the time they spend on Facebook.” As a result, management expects engagement to decline in the near term.
In the fourth quarter, the company updated its video recommendation algorithm and made other quality changes. Per Facebook, these updates brought down time spent on the platform by 5% or an estimated 50 million hour per day.
Facebook has also updated its platform to prevent false news, hate speech and other abuses. The company is investing on security systems and Artificial Intelligence (AI) technology to show more news from trusted sources and take down suicidal as well as terror content. The company is also working on making ads more transparent.
Management expects investments on these updates to affect profits in the near term. However, these initiatives are expected to help Facebook build a “stronger community” in the long haul.
Expanding Product Portfolio: Key Catalyst
Moreover, an innovative product roadmap that includes Watch, Stories and Marketplace will drive growth. Facebook launched Marketplace in 30 countries in 2017, including 11 countries in the fourth quarter.
The company launched plug-in for Messenger to smoothen communication between businesses and consumers. Facebook stated that more than 2 billion messages are now sent between businesses and customers every month.
WhatsApp recently surpassed 1.5 billion monthly active user base, with people sending more than 60 billion messages every day. Facebook recently launched WhatsApp Business — a new app designed to facilitate communication between small and medium businesses and customers.
2017 Numbers at a Glance
Earnings jumped 54.6% to $5.39 per share on revenues of $40.65 billion, which increased 47.1% over 2016.
Advertising revenues soared 48.6% year over year to $39.94 billion, while Payments and other fees fell 5.6% year over year to $711 million.
Mobile ad revenues grew 56% over 2016. Facebook stated that mobile conversions are on the rise as data from 17 markets showed that mobile accounted for 69% of online conversions on Black Friday and 64% on Cyber Monday. It also drove 80% of conversions on Singles’ Day, a popular day for online shopping in China.
Facebook ended the year with more than 25K employees, up 47%. The company made significant investments on R&D and security. At the end of 2017, almost 14K employees and contractors were involved in community operations, online operations and integrity efforts.
Quarterly Numbers in Details
Monthly active users (MAUs) were up 14% year over year to a staggering 2.13 billion at the end of the quarter.
Daily Active Users (DAUs) were 1.40 billion, reflecting a 14% year-over-year increase. This can primarily be attributed to growth in markets like India, Indonesia and Brazil. These markets represented 66% of 2.13 billion MAUs in the fourth quarter. However, DAUs declined in the United States and Canada sequentially (almost 700K).
Advertising revenues soared 48.1% year over year to $12.78 billion. Mobile ad revenues surged 57% year over year to $11.4 billion, contributing 89% to total ad revenues. Mobile-first video was 50% of the company’s video ad revenue in the quarter compared with 41% last quarter.
Ad impressions served increased 4%, while average price per ad increased 35% from the year-ago quarter. The growth was driven by feed ads on Facebook and Instagram.
Payments and other fees increased 7.2% year over year to $193 million.
Cost and expenses increased 32.5% to $5.62 billion due to a rise in workforce. Facebook hired 1,900 people during the quarter.
However, robust revenue growth provided enough cushion to operating margins. Operating income of $7.35 billion grew 61% year over year. Operating margin expanded 480 basis points (bps) to 56.7% in the quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2017, cash & cash equivalents and marketable securities were $41.71 billion compared with $38.29 billion as of Sep 30, 2017.
The company generated $7.67 billion of cash flow from operating activities in fourth-quarter 2017 compared with $6.13 billion in third-quarter 2017. Free cash flow was $5.41 billion compared with $4.37 billion in the year-ago quarter.
In 2017, Facebook bought back approximately $2 billion of Class A common stock. As of Dec 31, 2017, the company had approximately $4 billion remaining under its current authorization.
Guidance
Management believes that Facebook and Instagram are well positioned to grow in 2018, primarily due to increasing effectiveness of ads. The company expects ad impressions to grow at a modest pace.
For 2018, Facebook expects constant currency ad revenue growth rate to decelerate. The first-half of the year is anticipated to benefit from favorable exchange rate.
Facebook projects total expenses to increase between 45% and 60% over 2017. Capital expenditure is expected in the range of $14-$15 billion, driven by increased investment in data centers, servers, office facilities and network infrastructure.
Management expects tax-rate in the mid-teens range for 2018.
Long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected at 10%, 14.85% and 25%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Facebook (FB) Q4 Earnings Up Y/Y on Strong Revenues & MAUs
Facebook reported fourth-quarter 2017 earnings of $1.44 per share, which improved 19.1% from the year-ago quarter.
Excluding tax-related adjustments of 77 cents related to the enactment of the 2017 Tax Cuts and Jobs Act (the Tax Act) earnings were $2.21. The Zacks Consensus Estimate was pegged at $1.96.
Revenues of $12.97 billion handily beat the Zacks Consensus Estimate of $12.58 billion and surged 47.5% from the year-ago quarter. Excluding the impact of year-over-year changes in foreign exchange rates revenues jumped 43.5%.
Updates Impacted User Engagement in Q4
Facebook is focused on improving “conversation” and strengthen “connections” among friends. However, the company’s efforts to limit public content, news and video, affected Daily Active Users (DAUs) in its most penetrated market — the United States and Canada — in the reported quarter.
Facebook, Inc. Price, Consensus and EPS Surprise
Facebook, Inc. Price, Consensus and EPS Surprise | Facebook, Inc. Quote
On the fourth-quarter conference call, Facebook CEO Mark Zuckerberg clearly stated that “helping people connect is more important than maximizing the time they spend on Facebook.” As a result, management expects engagement to decline in the near term.
In the fourth quarter, the company updated its video recommendation algorithm and made other quality changes. Per Facebook, these updates brought down time spent on the platform by 5% or an estimated 50 million hour per day.
Facebook has also updated its platform to prevent false news, hate speech and other abuses. The company is investing on security systems and Artificial Intelligence (AI) technology to show more news from trusted sources and take down suicidal as well as terror content. The company is also working on making ads more transparent.
Management expects investments on these updates to affect profits in the near term. However, these initiatives are expected to help Facebook build a “stronger community” in the long haul.
Expanding Product Portfolio: Key Catalyst
Moreover, an innovative product roadmap that includes Watch, Stories and Marketplace will drive growth. Facebook launched Marketplace in 30 countries in 2017, including 11 countries in the fourth quarter.
The company launched plug-in for Messenger to smoothen communication between businesses and consumers. Facebook stated that more than 2 billion messages are now sent between businesses and customers every month.
WhatsApp recently surpassed 1.5 billion monthly active user base, with people sending more than 60 billion messages every day. Facebook recently launched WhatsApp Business — a new app designed to facilitate communication between small and medium businesses and customers.
2017 Numbers at a Glance
Earnings jumped 54.6% to $5.39 per share on revenues of $40.65 billion, which increased 47.1% over 2016.
Advertising revenues soared 48.6% year over year to $39.94 billion, while Payments and other fees fell 5.6% year over year to $711 million.
Mobile ad revenues grew 56% over 2016. Facebook stated that mobile conversions are on the rise as data from 17 markets showed that mobile accounted for 69% of online conversions on Black Friday and 64% on Cyber Monday. It also drove 80% of conversions on Singles’ Day, a popular day for online shopping in China.
Facebook ended the year with more than 25K employees, up 47%. The company made significant investments on R&D and security. At the end of 2017, almost 14K employees and contractors were involved in community operations, online operations and integrity efforts.
Quarterly Numbers in Details
Monthly active users (MAUs) were up 14% year over year to a staggering 2.13 billion at the end of the quarter.
Daily Active Users (DAUs) were 1.40 billion, reflecting a 14% year-over-year increase. This can primarily be attributed to growth in markets like India, Indonesia and Brazil. These markets represented 66% of 2.13 billion MAUs in the fourth quarter. However, DAUs declined in the United States and Canada sequentially (almost 700K).
Advertising revenues soared 48.1% year over year to $12.78 billion. Mobile ad revenues surged 57% year over year to $11.4 billion, contributing 89% to total ad revenues. Mobile-first video was 50% of the company’s video ad revenue in the quarter compared with 41% last quarter.
Ad impressions served increased 4%, while average price per ad increased 35% from the year-ago quarter. The growth was driven by feed ads on Facebook and Instagram.
Payments and other fees increased 7.2% year over year to $193 million.
Cost and expenses increased 32.5% to $5.62 billion due to a rise in workforce. Facebook hired 1,900 people during the quarter.
However, robust revenue growth provided enough cushion to operating margins. Operating income of $7.35 billion grew 61% year over year. Operating margin expanded 480 basis points (bps) to 56.7% in the quarter.
Balance Sheet & Cash Flow
As of Dec 31, 2017, cash & cash equivalents and marketable securities were $41.71 billion compared with $38.29 billion as of Sep 30, 2017.
The company generated $7.67 billion of cash flow from operating activities in fourth-quarter 2017 compared with $6.13 billion in third-quarter 2017. Free cash flow was $5.41 billion compared with $4.37 billion in the year-ago quarter.
In 2017, Facebook bought back approximately $2 billion of Class A common stock. As of Dec 31, 2017, the company had approximately $4 billion remaining under its current authorization.
Guidance
Management believes that Facebook and Instagram are well positioned to grow in 2018, primarily due to increasing effectiveness of ads. The company expects ad impressions to grow at a modest pace.
For 2018, Facebook expects constant currency ad revenue growth rate to decelerate. The first-half of the year is anticipated to benefit from favorable exchange rate.
Facebook projects total expenses to increase between 45% and 60% over 2017. Capital expenditure is expected in the range of $14-$15 billion, driven by increased investment in data centers, servers, office facilities and network infrastructure.
Management expects tax-rate in the mid-teens range for 2018.
Zacks Rank & Other Stocks to Consider
Facebook carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the broader technology sector are Micron Technology (MU - Free Report) , Lam Research (LRCX - Free Report) and The Trade Desk (TTD - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected at 10%, 14.85% and 25%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>