United Online, Inc.

United Online, Inc. (UNTD - Snapshot Report) is parlaying its social networking site, Classmates.com, into bigger profits as pay accounts jumped 30% over a year ago. UNTD trades with a PEG ratio of just 0.62.

Company Description

United Online operates Internet retail and social networking sites. The company runs FTD and Interflora brands and web sites (www.ftd.com and www.interflora.co.uk) both of which use the Mercury Man logo in 45,000 retail floral shops around the world.

United Online also operates social networking site Classmates Media (www.Classmates.com) in North America and Europe and online loyalty marketing (www.MyPoints.com) in North America. The company's communication services include value-priced Internet access and email providers NetZero and Juno.

United Online Surprised by 45.83% in the First Quarter

On May 5, United Online reported first quarter 2009 results that easily surprised on analysts' estimates of 24 cents by 11 cents, or 45.83%.

Total revenue was up 116% year over year but included FTD which was acquired in August 2008. Classmates Media revenue jumped 13% to $58.5 million from $51.9 million. Pay accounts increased 30% to a record 4.6 million from 3.5 million at the end of the first quarter of 2008.

Communication revenue, however, fell by 18% to $57.4 million from $69.9 million.

"We achieved adjusted OIBDA of $61.5 million in the first quarter, reflecting strong contributions from each of our operating segments," said Mark R. Goldston, Chairman and CEO.

"Excluding the FTD segment for comparability with the prior year, adjusted OIBDA increased to a first quarter record $40.4 million and was driven by a 34% year-over-year increase in segment adjusted OIBDA to $15.8 million within our Classmates Media segment, its best-ever performance for a first quarter," he added.

Cash Increased

The company raised its cash hoard during the quarter to $124.8 million from $104.5 million at the end of Dec 2008. Total debt fell $4.6 million to $408.9 million at the end of the quarter.

United Online also recently announced a quarterly cash dividend of 10 cents per share, which results in a current yield of 5.40%. It was the 17th consecutive quarterly dividend.

Consensus Estimates Jump

Given the solid quarter, covering analysts are rushing to raise full-year estimates. 3 out of 3 covering analysts increased second quarter estimates by an average of 2 cents to 28 cents per share.

2009 consensus estimates climbed 9% in the last week to $1.09 from $1.00 per share.

Value Fundamentals

United Online is a Zacks #1 Rank (strong buy) stock. It has attractive value characteristics as it's trading at only 6.9x forward earnings. Its price-to-book is also just 1.72. The company has an outstanding 5-year average return on equity (ROE) of 20.66%.