WebMD Earnings Preview: First Quarter 2009

WebMD [[WBMD]] is scheduled to report their first quarter 2009 results after the market closes on Tuesday, May 5. Based on our analysis, we at EarningsPreviews.com are expecting WBMD to report better than expected results that exceed Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $91.1 billion and EPS of $.06. This would represent a 12% increase in revenues from last year’s $81.7 million in the same period. The current analyst consensus estimates calls for revenues of $90.7 million and EPS of $.05. On February 19, the company provided first quarter revenue guidance of $90 – $92 million and implied $.03 – $.05 EPS.

 

WebMD remains one of the bright stars of the internet sector. The company continues to post strong, double-digit growth rates despite the difficult advertising environment. Our checks show that WebMD.com experienced strong traffic growth in the first quarter as consumers flocked to the internet for answers to their health-related concerns. Meanwhile, pharmaceutical firms continue to shift more of their advertising spend into online mediums such as WebMD.com.

 

Going forward we would expect WebMD’s strong growth trends to continue. The company is well positioned to continue to benefit from strong organic growth. In addition, they have a strong balance sheet with zero debt and $325 million in cash and investments which could help fuel further growth.

 

Share Performance

Since the beginning of the year, WebMD’s shares are up over 10%. In 2008, WebMD’s shares fell over 42% as the stock underperformed the 34% decline in the Dow Jones index.

 

Valuation

Shares are now trading at 36x consensus 2010 EPS estimates. This is a premium to the relative valuations of their peer group. We believe there is potential upside in the coming quarters which could lead to further price appreciation.

 

Recommendation: Buy with a $30 price target.

 

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