Citi Gives Earnings Preview On Yahoo

Yahoo YHOO is set to report Q3 Results on 10/19. Citi is looking for Gross Rev of $1.61B, Net Rev of $1.13B, EBIT of $182MM and GAAP EPS of $0.17, vs. Street ests of Gross Rev of approx $1.60B, Net Rev of $1.13B, EBIT of $178MM, and GAAP EPS of $0.14. Based on intra-quarter channel checks and our model sensitivity work, Citi believes Street Q3 estimates are reasonable, with no material signs of upwards or downwards Rev variance, but a greater likelihood of EPS upside on cost controls. The WSJ reported that YHOO might be an target by a group of Private Equity firms. Yahoo!'s CF, off-balance sheet assets, and the likely lack of a strategic buyer provide the PE logic. The size and complexity of the deal, however, make it unlikely. Pos from an end-demand perspective, but neg from a competitive perspective. Google disclosed for the first time that its Display biz is on a $2.5B revenue run rate. We are modeling only $1.9B in Gross Display O&O Ad revenue for Yahoo! in 2010. YHOO closed Friday at $16.25