WebMD Earnings Preview: Fourth Quarter 2008

WebMD [[WBMD]] is scheduled to report their fourth quarter 2008 results after the market closes on Thursday, February 19. Based on our analysis, we are expecting WBMD to report inline results that meet Wall Street’s expectations.


Analyst Expectations

We are forecasting revenues of $105.0 million and EPS of $.18. This would represent a 9% increase in revenues from last year’s $96.6 million in the same period. The current analyst consensus calls for revenues of $105.8 million and $.18 EPS. On October 30, the company provided fourth quarter guidance for revenues of $104 – 108 million and $.16 – .19 EPS.


Management reaffirmed their guidance estimates in December and then again in January. So we feel very comfortable that the company will be able to meet Wall Street’s expectations for the quarter. Our checks show strong traffic growth during the quarter which would further confirm this assumption.


While the company’s online advertising revenues have held up better than their peers, management has also been proactive in reducing their cost structure. In December, they announced headcount reductions equal to 4-5% of their employee base.


Looking ahead to 2009, Wall Street is anticipating revenues to be at the low end of the $420 – 450 million guidance that it provided during the last earnings call. While management may narrow the top-end of the range, we would be surprised if they lowered the bottom end. This is a company that will continue to post double digit growth even in this current economic environment.


Share Performance

WebMD’s shares have dropped 12% since the beginning of the year. In 2008, the shares dropped 43% inline with the 41% drop in the Nasdaq.



Shares are now trading at 34x consensus 2009 EPS estimates. This represents a healthy premium to their peer group. We would expect the stock to post a modest gain following the quarterly results announcement.


Recommendation: Buy with a $21 price target.


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