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Monster Worldwide Inc. (MWW - Analyst Report) reported earnings of 2 cents per share in the fourth quarter of 2013, which missed the Zacks Consensus Estimate by a nickel. Earnings per share declined both on a year over year basis as well as sequentially by 59.9% and 77.8% respectively.

Quarter Details

Revenues declined 5.9% year over year to $198.7 million in the fourth quarter but were ahead of the Zacks Consensus Estimate. On a year-over-year basis, results were impacted by declines in revenues at Monster Careers (down 6.2% year over year) and Internet Advertising & Fees (down 2.9% year over year).

Moreover, Monster witnessed year-over-year revenue declines across most of its geographies. Although revenues from North America remained flat on a year-over-year basis, revenues from Europe and Asia-Pacific were down 14.0% and 15.0% from the year-ago quarter, respectively.

Operating expenses declined 3.7% from the year-ago quarter to $188.7 million. While salaries & related posted an increase (up 2.1% year over year), the other contributors toward operating expenses decreased. Office & general expenses (down 9.1% year over year) and marketing and promotion expenses (down 12.7% year over year) lowered overall operating expenses.    

Monster reported non-GAAP operating income of $9.9 million, which was down 34.3% from the year-ago quarter. Operating margin contracted 220 basis points (bps) to 5.0% from 7.2% in the year-ago quarter, due to lower revenue base.

Non-GAAP net income from continuing operations decreased 64.8% from the year-ago quarter to $2.3 million.

Monster had $25.0 million in cash from operating activities and free cash flow was $17 million. Deferred revenue was $342.0 million, which grew 8.0% sequentially. During the quarter, Monster repurchased 8.2 million shares for $46.0 million.

Guidance

Monster expects first quarter earnings to range from 6 cents to 10 cents per share, while the Zacks Consensus Estimate is pegged at 7 cents per share, which is lower than the mid-point of the guidance.

Recommendation

Monster’s results continued to be affected by reluctant recruiters amid a sluggish macroeconomic environment. Moreover, its India business continues to be challenged by a tough economic environment. The company continues to face significant competition from professional and social networking websites such as LinkedIn Corp. (LNKD - Analyst Report) and Facebook (FB - Analyst Report) as well as from traditional advertising companies such as Omnicom Group (OMC - Analyst Report).

We believe that management guidance is positive due to improving business condition in North America and Europe. The company’s corporate restructuring initiative is expected to boost margins, going forward.

Moreover, the partnership with H&Q is believed to aid the company in extending its footprint in South Korea. Additionally, Monster’s core business is showing signs of improvement and exhibiting robust potential for cash flow generation.

Currently, Monster has a Zacks Rank #2 (Buy).

 

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