United Online Inc.

United Online Inc. (UNTD - Snapshot Report) saw its social networking site post record revenues for the third-quarter as pay accounts rose. The company has surprised on earnings 2 out of the last 4 quarters by an average of 2.85%. UNTD trades at only 5.4x forward earnings.

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. FTD was just acquired during the third quarter.

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.

Classmates Media Revenue Jumps 18%

On Nov 5, United Online reported third-quarter results that matched Wall Street estimates. Net income increased 29% to $26.4 million from $20.5 million in the third-quarter of 2007. Earnings were 22 cents per share compared to 21 cents in the year ago period.

Revenues fell 5% from the year ago period to $120.9 million from $126.8 million if you exclude the FTD segment which was acquired during the quarter. Including FTD, revenue grew 33.4% to $169.2 million from $126.8 million in 2007.

The Classmates Media segment outperformed with revenue growth of 18% to a record $58.7 million from $50 million. Pay accounts increased 278,000 to more than 4 million Classmates Media pay accounts.

Consensus Estimates for the Fourth Quarter and Full Year Rise

Given the strong revenues in the Classmates Media segment and the acquisition of FTD, United Online was bullish about the 2008 full year. The company raised its revenue guidance to the range of $677.2 to $685.2 million.

Covering analysts followed suit and have been raising estimates for both the fourth quarter and the full year. Fourth-quarter estimates rose 9 cents to 31 cents in the last 30 days.

For the full year, estimates jumped 16% to $1.02 from 88 cents per share.

Value Fundamentals

United Online is a Zacks #1 Rank (Strong Buy) stock. It's trading at only 5.4x forward earnings. UNTD's price-to-book is 0.87. The company has an outstanding 5-year return on equity (ROE) of 21.24%.

Additionally, United Online has paid a dividend for 15 consecutive quarters. Recently, the dividend was reduced from 20 cents to 10 cents following the acquisition of FTD. The current dividend yield is 6% and the company, in its third-quarter earnings report, stated its continued support of the dividend.