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Why Monster Worldwide Fell 36% Despite Q4 Earnings Beat

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Shares of Monster Worldwide Inc. plunged 36% yesterday after the company reported its fourth-quarter 2015 results. Adjusted earnings (including stock-based compensation but excluding one-time items) of 11 cents per share came ahead of the Zacks Consensus Estimate of 10 cents a share. The bottom line turned around significantly from a loss of 5 cents reported in the year-ago quarter.

However, revenues of $159.2 million not only missed the Zacks Consensus Estimate of $167 million but declined 9.1% year over year. More importantly, the company provided a soft guidance for the first quarter, triggering a massive sell off.

Quarter Details

Quarterly revenues from Careers – North America were $112.1 million, down 8% year over year. Revenues from the Careers – International segment were $47.1 million, down 11% on a year-over-year basis.

On a non GAAP basis, operating expenses of $141 million declined nearly 15% year over year. The company reported adjusted EBITDA margin from continuing operations of 18.1% compared with 12.2% reported in the year-ago quarter.

Monster exited 2015 with $167.9 million in cash and cash equivalents, compared with $72 million as on Dec 31, 2014. Cash flow from operating activities was $18.7 million and free cash flow was $11.4 million. Deferred revenues from continuing operations were $279.8 million,up from $251 million as of Sep 30, 2015.

The company repurchased 1.3 million shares in the quarter for approximately $8 million.

Business Update

Separately, the company also announced that its social recruitment advertising platform- Monster Social Job Ads has now partnered with Facebook (FB - Free Report) for advertisement. The company was already distributing job ads on Twitter (TWTR - Free Report) . 

In addition, the company announced that it will be entering a joint venture (JV) with kununu GmbH, a subsidiary of XING AG. The JV will be testing the delivery of content-rich employer reviews and ratings, provided by both current and former employees and other candidates as well.

Outlook

For first quarter 2016, the company expects non-GAAP earnings per share from continuing operations in the range of 6 to 10 cents, excluding $2 to $3 million of stock-based compensation and $1.2 million of “non-cash debt discount amortization pertaining to the convertible debt and restructuring charges associated with Reallocate to Accelerate program”.

The Zacks Consensus Estimate is currently pegged at 12 cents a share.

Our Take

Monster Worldwide has been seeing weakness in its transactions business in key regions like North America and Canada. We expect that going ahead, with the macroeconomic outlook remaining unclear, employers might continue to remain conservative with their hiring budget. Further, competition has intensified over the last few years in the online employment market. Many recruiters are already using alternative social media sites such as LinkedIn . Though Monster is now working to build its social media presence, the headwinds will likely remain in the near term.

Nonetheless, there can be some respite because of the re-branding and cost-cutting initiatives that are expected to boost its growth over the long term.

Monster currently has a Zacks Rank #3 (Hold).

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