WebMD bounces back on 4Q revenue and 2013 outlook

WebMD jumps 25 percent as 4th-quarter revenue and 2013 estimates surpass expectations

Associated Press

NEW YORK (AP) -- Shares of WebMD Health Corp. surged Friday after the health information company reported better-than-expected revenue in the fourth quarter and forecast a smaller sales decline in 2013.

THE SPARK: WebMD took a loss on costs related to job cuts and other items. Its revenue fell 12 percent to $132.7 million, but that was about $8.5 million more than analysts had expected. The company said its revenue will fall further in 2013, but its guidance was more optimistic than analysts had expected.

The New York company's revenue fell 16 percent to $469.9 million in 2012. It said sales will be between $430 million and $455 million in 2013, a decline of as much as 8 percent. But FactSet reports that analysts expected $416.9 million in revenue on average.

THE BIG PICTURE: WebMD has struggled because its drug company customers are spending less on advertising. That's because patents on important drugs are expiring. WebMD is also dealing with tough competition from social networking sites and ad networks. The company cut its revenue guidance twice in 2011 and also had to lower expectations twice in 2012. It took a loss for the full year and expects to lose money in 2013 as well.

WebMD said in December that it would eliminate 250 jobs to lower its spending.

The company said Thursday that it has signed contacts that would have it play "a unique and integral role" in the launch of new drugs. It did not disclose the names of the products but said they have not yet been approved and will likely contribute more to its revenue in 2014 than in late 2013.

THE ANALYSIS: Cowen & Co. analyst Kevin Kopelman said the company is working on new products and possible acquisitions that could help it take advantage of the expansion of the Patient Protection and Affordable Care Act in 2014. Kopelman said WebMD expects better profit margins in 2013 because of its cost cuts.

"WebMD has stemmed the decline in revenues by reducing campaign turnaround times, lowering pricing, unbundling ad products, and continuing to grow website traffic," he said. He maintained a "Neutral" rating on the stock.

SHARE ACTION: Shares of WebMD advanced $4.19, or 25.7 percent, to $20.49 in afternoon trading. The stock last traded over $20 in early July. Later that month, WebMD cut its sales outlook by about $50 million and said it would take a loss in 2012.

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