A month has gone by since the last earnings report for Yandex (YNDX). Shares have added about 4.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Yandex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Yandex's Q4 Earnings Miss, Revenues Top Estimates
Yandex reported fourth-quarter 2018 adjusted earnings of 30 cents (RUB 18.67) per share missing the Zacks Consensus Estimate by 2 cents. However, it surged from the year-ago quarter’s figure of RUB 10.61 per share.
Revenues of $559.1 million (RUB 38.8 billion) surpassed the Zacks Consensus Estimate of $534 million. The figure exhibited year-over-year growth of 39% in ruble terms.
The top-line growth was driven by accelerating advertisement revenues and its strong position in Russian search market. Further, well-performing Taxi, Classifieds, Media Services and Experiments segments of the company drove results.
Additionally, the company witnessed growth of 10% in its paid clicks during the reported quarter.
However, the deconsolidation effect of Yandex.Market remained an overhang throughout the fourth quarter. Excluding this impact, the revenues would have reflected growth of 46% on a year-over-year basis.
Total revenues of Yandex can be categorized into two groups: online advertising revenues and other revenues.
The total online advertising revenues came in RUB 29.5 billion (75.9% of total revenues), exhibiting growth of 18% on a year-over-year basis.
This was primarily driven by robust performance of Yandex properties which accounted for 75.9% of the total advertising revenues and exhibited year-over-year growth of 18.3%. Further, Advertising network revenues contributed 24.1% to the advertising revenues and grew 16% from the year-ago quarter.
Excluding deconsolidation effect of Yandex.Market, the online advertising revenues would have grown 25%.
Other revenues of RUB 9.3 billion (24.1% of total revenues) soared 235% from the prior-year quarter. This can be attributed to the well-performing Yandex.Taxi and Yandex.Drive.
Segments in Detail
Search and Portal: The segment generated RUB 30.7 billion revenues (79.1% of total revenues), up 27% year over year. The company’s strong position in the Russian search market remains the key growth driver. Notably, its market share reached 56.5% during the reported quarter. This can be attributed to Yandex’s increasing desktop and mobile search shares which reached 68% and 47.3%, expanding 70 bps and 280 bps year over year, respectively. The company’s search share on Android and iOS came in 49.5% and 40%, respectively. Mobile traffic accounted for 49.2% of the total search traffic in the reported quarter.
Taxi: The segment generated RUB 6.9 billion revenues (17.8% of revenues), surging a whopping 216% from the year-ago quarter. Impressive year-over-year growth was driven by increasing number of rides which soared 112% from the prior-year quarter. Further, robust food delivery business also contributed well. The number of orders delivered exceeded 1 million in December.
Classifieds: The segment generated revenues of RUB 1.1 billion (2.8% of revenues), advancing 61% year over year. This was driven by strong performance of auto.ru division of the company. Moreover, revenues from listing fees and VAS accelerated top-line growth within this segment.
Media Services: The segment generated revenues of RUB 679 million (1.7% of revenues), advancing 69% from the year-ago quarter. This came on the back of expanding content library of KinoPoisk, growing subscription revenues and video advertising.
Experiments: The segment yielded RUB 1.2 billion revenues (3.1% of total revenues), up from $146 million in the prior-year quarter. This was driven by robust performance of Yandex’s Zen and Yandex.Drive.
In fourth-quarter 2018, adjusted net income margin was 17.9%, contracting 90 bps from the year-ago quarter.
Per the company, its operating margin came in 19.2% in the fourth quarter, expanding 190 bps from the year-ago quarter.
Further, Adjusted EBITDA margin was 32.9%, contracting 160 bps year over year. This can be attributable to deconsolidation of Yandex.Market, increasing investment in Yandex.Drive and Yandex.Cloud, sale of hardware devices and growing marketing and advertisement costs.
Operating expenses as a percentage of revenue was 80.8%, contracting 190 bps from the year-ago quarter.
The company’s total traffic acquisition cost (TAC) came in RUB 6.2 billion, surging 29% on a year-over-year basis.
Balance Sheet & Cash Flows
As of Dec 31, 2018, cash and cash equivalents were $990.3 million, up from $753 million as of Sep 30, 2018.
Accounts Receivables totaled $209.7 million, increasing from $184.8 million in the previous quarter.
For the fourth quarter, cash flow from operations was $123.9 million which surged from the previous-quarter figure of $115.8 million.
For 2019, Yandex anticipates total revenues to grow within a range of 28-32% in ruble terms from 2018.
The company expects ruble-based revenue from Search and Portal segment to grow in the range of 18-20% from 2018.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
At this time, Yandex has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Yandex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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