Yahoo! Earnings: Here is What You Need to Know

Yahoo! Earnings ReportYahoo! Inc. (NASDAQ: YHOO) in Sunnyvale, Calif., announced its second quarter earnings after Tuesday’ trading close, posting overall revenue of $1.08 billion that missed projections by $20 million, but earnings per share of 27 cents beat estimates by 4 cents.  YHOO shares went up 0.6 percent at one point overnight, but were up just slightly in the first hours of Wednesday trading to $15.61 per share.

Overall, some of the numbers were better than in prior reports. Display ad revenue was up 1 percent over the same quarter a year ago, though that is considered an improvement over a revenue drop in Q1; search ad revenue was up 4 percent; and thanks to a few layoffs, operating expenses were down 11 percent over Q2 of 2011. However, free cash flow was reported at $93 million, which was down 2 percent from Q2 of 2011 and about ahlf of reported net income of $190 million. The company bought back $456 million of shares during the quarter.

“In the second quarter, non-GAAP earnings per share exceeded consensus and both display and search revenue ex-TAC showed modest growth,” said CFO Tim Morse. “We also moved aggressively with new strategic agreements with Alibaba and Facebook and announced several new partnerships including CNBC, Clear Channel and Spotify.”

Not to mention the very recent hiring of Marissa Mayer as its new CEO (ex of Google), which gave the stock as little boost in the days since announcing her hiring.

Dan Loeb’s Third Point hedge fund should be very interested in the workings of Yahoo! in the coming months and years, as Loeb was recently elected to the company’s board of directors. Third Point was invested in $1.08 billion of YHOO stock (more than one-fourth of its portfolio) as of the end of March, which was five times more than the No. 2 hedge fund, Richard Perry’s Perry Capital ($198 million).  Both funds, however, increased their stock stakes by about 25 percent during the first quarter of 2012.