A month has gone by since the last earnings report for Shutterfly . Shares have added about 16.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Shutterfly due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Shutterfly Reports Narrower-Than-Expected Loss in Q1
Shutterfly reported better-than-expected results in the first quarter of 2019. Notably, this marked the company’s ninth straight quarter of earnings beat. Its revenues surpassed estimates after missing it for two consecutive quarters.
Adjusted loss of $2.44 per share compared favorably with the Zacks Consensus Estimate of loss of $2.53 but was wider than the prior-year quarter’s recorded loss of $2.47.
Net revenues totaled $324.7 million, which improved 62.6% year over year and surpassed the consensus mark of $323 million. The sharp increase in the top line was primarily owing to robust performance by the Lifetouch and Business Solutions segment, offset by lower-than-expected Shutterfly Consumer segment revenues. Notably, first-quarter earnings marked the 73rd consecutive quarter of year-over-year net revenue growth.
Revenues at the Consumers category amounted to $148.8 million, down2.1% year over year. The segment’s cost of net revenues increased 6.6% year over year in the first quarter. Margins, as a percentage of total revenues, were negative 5.6%, comparing unfavorably with the prior-year quarter’s margin growth of 1%.
The Lifetouch segment generated revenues of $130 million. This segment was formed following the acquisition of Lifetouch. Revenues from the Shutterfly Business Solutions (SBS) segment declined 2.4% year over year to $46.5 million. The segment’s margins in the quarter grew 7.9%, marking an improvement of 290 basis points (bps) from the first quarter of 2018.
Expenses and Profits
Shutterfly’s total operating expenses in the first quarter of 2019 were $220.1 million, up 104.2% from the year-ago quarter. Total expenses were affected by a whopping increase in sales and marketing costs. Also, higher general and administrative expenses, and costs associated with technology and development hurt overall expenses.
Net Loss in the quarter was $83.6 million, up from $27.2 million in the prior-year quarter.
Shutterfly exited the first quarter with cash and cash equivalents of $156.3 million compared with $521.6 million at the end of 2018. Accounts receivables summed $56.7 million, down from $82 million as of Dec 31, 2018. Long-term debt totaled approximately $900 million compared with $1,090 million at the end of 2018.
For second-quarter 2019, net revenues are projected between $469 million and $479 million. Gross profit margin is estimated to be 51%. Adjusted EBITDA margin is expected to be12.6-13.4%. Operating income is envisioned to be$0-$5 million.
Also, Shutterfly Consumer revenues are projected to be $166-170 million while the same from Shutterfly Business Solutions are likely to be between $48 million and $51 million. Lifetouch revenues are envisioned to be $255-$258 million.
2019 View Remains Same
Net revenues are estimated to be between $2,130 million and $2,210 million. Gross profit margin is expected to be 51.4-51.7%. Meanwhile, adjusted EBITDA is anticipated to be $315-$340 million. Operating income is envisioned to be $80-$105 million.
Also, Shutterfly Consumer revenues are projected to be $975-1,025 million, while the same from Shutterfly Business Solutions are likely to be between $240 million and $250 million. Lifetouch revenues are envisioned to be $915-$935 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -607.69% due to these changes.
Currently, Shutterfly has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Shutterfly has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.