Profits expected for AOL

Wall Street expects the online giant to post a fourth-quarter profit and to focus growth in e-commerce and subscribers.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Wall Street expects America Online to post a fourth-quarter profit tomorrow and to focus growth in e-commerce transactions and subscribers.

During the previous quarter, AOL's results were four cents per share better than many analysts had expected. One analyst said that AOL may beat analysts' estimates again for the fourth quarter--by a few cents per share.

Wall Street expects AOL to post a profit of 19 cents a share, according to First Call.

"I have an estimate of 19 cents, but I wouldn't be surprised if they beat that by two or three cents," said Scott Appleby, an analyst with ABN AMRO.

Analysts largely have been holding firm on their AOL earnings estimates and recommendations, said Tony Crooks, a First Call research associate. Analysts reporting to First Call have not changed their earnings estimates on the company since June 12, save for one analyst who changed his recommendation last month, raising it to a "strong buy" from a "weak buy" on July 24.

Appleby said that, when AOL holds its conference call with analysts tomorrow, he's hoping to hear that the online giant generated $125 million for the quarter--a 35 percent increase from its year-ago performance and a 10 percent sequential increase.

Although subscriber growth tends to slow during the summer months, Appleby said, AOL's may be higher than expected.

"We're looking for them to report a growth of 600,000 domestic subscribers, but they could hit 800,000 to 900,000," Appleby said. Based on his growth projections of 600,000 U.S. subscribers, such numbers would translate into roughly 5 percent year-over-year growth and 3 percent to 4 percent growth sequentially.

AOL today also announced a deal with Netscape's Netcenter to promote AOL's community guide Web site, Digital City. Under the terms of the deal, the companies will share advertising revenue on Netcenter's Digital City channel. However, those revenues will not show up until late September or early October, once the service has been launched.