Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):
IAC Net Falls Amid Softness at Shopping Network
Summary: IAC/InterActiveCorp's Q2 results: Revenue up 18% year over year to $1.61 billion. Net income down 91% to $53.8 million from $618.1 million, which was boosted by a one-time gain of $464.5 million from the asset sales and the inclusion of Expedia, which has since been spun off. EPS fell to $0.17 versus $1.77 a year earlier. Revenue from the retailing unit, which includes the Cornerstone catalog business and Home Shopping Network, rose 2% to $775 million, with operating profit up 9% to $47 million. Revenue from Home Shopping Network actually declined. Revenue from the Services Division, which includes Ticketmaster and other international ticketing units, rose 21% to $533 million. Operating profits from the Lending Division, ie. LendingTree, fell 37% due to a weaker mortgage market and higher marketing costs. Year over year results from the Media and Advertising Division aren't helpful, as they include the acquisition of Ask.com. Operating profit from the Membership and Subscriptions Division, which includes Match.com, vacation time-share business Interval International, and discount business Entertainment Publications, was $21.3 million, despite a $17.9 million loss at Entertainment Publications. "Although IAC's earnings revealed management problems and low margins in several of its businesses, analysts said the stock rose because results in other operations -- such as ticket sales and online dating services -- were better than anticipated"
Comment on related stocks/ETFs: The article ommited some key data points: "Adjusted" EPS of $0.32 beat the consensus estimate of $0.29, and revenue of $1.61 billion narrowly beat the consensus of $1.6 billion. So the upside came from better-than-expected profitablility, particulalry from Ticketmaster and Match.com. IAC's results were issued before the market opened yesterday, and the stock rose almost 6% in subsequent trading during a generally down-market; so the results are now largely priced-in. The key issue for investors is therefore the implications for other stocks. First, the strong results from Ticketmaster are bullish for Hollywood Media (NASDAQ:HOLL), which sells theater tickets online and also owns 26% of Movietickets.com. (Full disclosure: the author is long HOLL.) From the IAC conference call: "TicketMaster’s strong momentum continued in Q2, selling more than 30 million tickets for the third consecutive quarter, and achieving all-time highs in revenue, which increased 14%, profits, and online penetration, thanks to a healthy summer concert season and 21% higher international revenue, with business in the U.K. and Australia performing very well." Second, the increased marketing costs for LendingTree are bearish for mortgage lenders, particularly those that are reliant on online advertising. CFO Thomas J. McInerney talked about "a very challenging operating environment" and said that customer acquisition costs rose 20% year over year. Full conference call transcript here.