AOL's fourth quarter lofts over profit forecast

The Internet company had better net income and revenue than analysts expected. Ad revenue is up, but revenue overall declined.

AOL's revenues have been sliding downward over the years.
AOL's revenues have been sliding downward over the years. AOL

AOL handily beat analyst profitability estimates for the fourth quarter, a bright spot for a company that's been gradually declining for years.

The company reported net income of 23 cents per share, compared with expectations that averaged 17 cents per share, according to analysts surveyed by Thomson Reuters. Net income itself dropped 66 percent from $66.2 million a year ago to $22.8 million, but that was well above the $14.7 million analysts had expected.

The net income was lower than a year earlier in part because of an $8.5 million patent lawsuit settlement with Bascom and the fact that last year's quarter was boosted by sale of AOL's stake in Brightcove.

AOL revenue declined 3 percent from $596 million to $576.8 million, but again, that was ahead of analysts' expectation of $573.1 million. And AOL pointed eagerly to the fact that advertising, its single biggest revenue source, increased 10 percent compared to the year-earlier quarter from $331.6 million to $363.8 million.

In trading today before the market opened, AOL's stock rose 39 cents, or 2.4 percent, to $16.60.

"AOL showed solid improvement in 4Q, particularly on cost controls in cost of goods sold," said Macquarie Capital analyst Ben Schachter and colleagues in a research note today. "Additionally, Access and Search revenues at AOL.com both beat our estimates meaningfully, while display revenues at AOL Sites were just in line with our forecast."

Chief Executive Tim Armstrong was bullish, too. "AOL took a large step forward in Q4 and I am very pleased with the way we ended the year," he said in a statement. "We continue to invest in AOL and will continue to improve our operations during 2012."

AOL's chart shows a sequential turnaround in operating income before depreciation and amortization (OIBDA), but even if an $8.5 million settlement with Bascom were excluded, the fourth-quarter results for 2010 were better than those for 2011.
AOL's chart shows a sequential turnaround in operating income before depreciation and amortization (OIBDA), but even if an $8.5 million settlement with Bascom were excluded, the fourth-quarter results for 2010 were better than those for 2011. AOL
 

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