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MercadoLibre (MELI) Tops Q4 Earnings & Revenue Estimates

MercadoLibre Inc. MELI reported fourth-quarter fiscal 2016 earnings of $1.16 per share, which surged 31.8% year over year and beat the Zacks Consensus Estimate by 26 cents.

The solid growth was driven by 41.8% (68% at constant currency) growth in revenues, which totaled $256.3 million and was better than the Zacks Consensus Estimate of $247 million.

Revenues increased 29.6% to $844.4 million in full-year 2016. Earnings grew 28.8% over 2015 to $3.09 per share.
 

MercadoLibre, Inc. Price, Consensus and EPS Surprise

 

MercadoLibre, Inc. Price, Consensus and EPS Surprise | MercadoLibre, Inc. Quote

We note that MercadoLibre has outperformed the Zacks Electronic Commerce industry in the last one year. While the stock gained 98.9%, the industry witnessed an increase of 46.7%.



Segment Revenue Details

Gross Merchandise Volume (GMV) increased 10.8% (48.3% at constant currency) to $2.22 billion. Items sold during increased 40.2% to 51.6 million.

Number of confirmed registered users at end of period increased 20.4% to 174.2 million. Unique buyers increased 22.8% to 13.2 million, while sellers jumped 18.2% in the quarter.

Marketplace revenues grew 40.7% (74.4% at constant currency), while non-marketplace revenues grew 43.3% (58.7% at constant currency). The strong non-marketplace revenue growth was driven by robust performance from MercadoPago merchant services, higher financing revenues from adoption of credit offerings and shipping.

Financing revenues accelerated to 43% growth at constant currency, attributable to higher adoption of the company’s credit offerings in Brazil and Argentina. Shipping revenues grew 65% at constant currency due to strong adoption in Brazil (up 118%), Argentina (up 10%), Colombia, and Chile.

Classified revenues grew 23% at constant currency, with strong performance witnessed in Argentina, which grew 72% but was fully offset by a contraction of 29% in Mexico.

MercadoPago’s Total Payment Volume (TPV) surged 57.5% from the year-ago quarter to almost $2.45 billion. Total payment transactions through MercadoPago climbed 67.1% to 42.5 million.

MercadoPago’s merchant service TPV soared 84.1% year over year at constant currency driven by growth in number of large clients, higher amount of cross-border payments, successful open platform integrations and increasing payment volume from mobile point-of-sale (POS) solutions in Brazil.

Notably, downloads of MercadoLibre’s native mobile app reached slightly above 52 million, which represents almost 16% of total Internet users in Latin America. Further, mobile GMV grew 99% year over year at constant currency, representing 39% of total GMV, which is a gain of 10% from the year-ago quarter.

MercadoPago’s penetration rate improved to 77.8% as compared with 54.6% in the year-ago quarter. In October, MercadoLibre launched MercadoPago in Uruguay. By the end of the quarter, MercadoPago was used in almost one-fourth of Uruguay’s GMV transactions.

MercadoEnvíos shipped 25.9 million items, up 74.9% in the quarter, reflecting growing adoption of the service.  MercadoEnvíos shipped 71.6% of items sold in Brazil, 50.3% in Mexico, 31.8% in Argentina and 39.2% in Colombia.

Region wise, Brazil, Argentina, Mexico, and Other Countries revenues increased 91.6%, 3.9%, 8.4% and 46.6%, respectively. However, Venezuela revenues declined 10.1% from the year-ago quarter.

Operating Details

Gross margin contracted 160 basis points (bps) from the year-ago quarter to 63.5%. The decline in gross margin was can be attributed to higher sales taxes due to the increased adoption of financing, credit and shipping services. Moreover, higher investments in hosting and increase in costs related to the sale of mobile POS payment devices hurt gross margin.

Operating expenses as a percentage of revenues declined from 46.4% in the year-ago quarter to 38.3%. The decline was noticeable across all the expense line, with product and technology development, sales and marketing, and general and administrative declining 220 bps, 440 bps and 160 bps, respectively.

Consequently, operating margin (excluding impairment) expanded 660 bps on a year-over-year basis to 25.2% in the reported quarter.

Balance Sheet & Cash Flow

MercadoLibre exited the quarter with cash and cash equivalents and short-term investments of $487.5 million. The company generated cash from operations of $42.6 million, while free cash flow was $26.9 million during the quarter.

Zacks Rank & Other Key Picks

MercadoLibre sports a Zacks Rank #1 (Strong Buy). Alibaba BABA, Attunity ATTU and Zendesk ZEN are other stocks worth looking in the broader sector with the same Zacks Rank as MercadoLibre. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alibaba, Attunity, and Zendesk are pegged at 26.1%, 20% and 25%, respectively.

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MercadoLibre, Inc. (MELI): Free Stock Analysis Report
 
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