eBay Earnings Preview: Top-Line Growth Expected, Segments Showing Strength

eBay Inc. EBAY, operator of the world's largest on-line marketplace and the leading on-line payment service provider, will report its Q4 and full-year 2012 financials after the market close on Wednesday, January 16. According to Thomson/First Call, the current consensus Q4 estimate for eBay is $0.69 vs. $0.60, which puts full-year 2012 EPS at $2.35 vs. $2.03. Estimates range from $0.59 to $0.70 for the quarter, and they skew towards the high end. eBay has delivered modest positive earnings surprises over each of the last four quarters, topping the consensus expectation by two percent to six percent, and the consensus estimate for the firm's Q4 EPS has edged up a penny over the last 90 days. On the revenue side, analysts are collectively looking for eBay to grow its top line in the Q4 by nearly 18 percent to $3.97 billion. That represents a slight slowdown in the sales growth rate; for the year 2012 EBAY is forecast to increase revenues by 20.6 percent. Of the 35 sell-side analysts covering eBay and publishing opinions, nine have Strong Buy ratings, 14 rate the shares as a Buy, and 12 carry a Hold opinion. That distribution of analyst opinion has barely budged over the past three months. Both of the company's segments, Marketplaces and Payments, are growing their top and bottom lines at double-digit rates. Marketplaces includes eBay.com, half.com, and StubHub, while significant businesses in the Payments division are PayPal and BillMeLater. Company-wide, volume has grown in excess of 20 percent on a monthly basis year-over-year for the last nine months through November, as robust results in Payments and in fixed price transactions have more than offset shrinkage in eBay's auction price business, originally the primary thrust of the company, which was founded in 1995. EBAY's solid fundamentals haven't gone unnoticed by the market, as its shares have soared 73 percent over the past 12 months. And according to Thomson Reuters and Morgan Stanley, EBAY's enterprise value- to-2 year EBITDA ratio of 16.3x is at a five year high. It sports a lofty P/E ratio of 19.1x on consensus estimated 2013 EPS of $2.75, a P/E-to-growth ratio of 1.55x, and a 5.11 price-to-sales ratio on a trailing 12-month basis. Analysts cite the firm's general tendency to give conservative earnings guidance to investors, and along with the likely sustainability of the trends driving its sales and earnings growth, it appears there is a low probability of a disappointing announcement from eBay tomorrow.