Yahoo! (YHOO) will report Q1 results tomorrow afternoon, and analysts have been refining their models, projecting perhaps slightly better revenue and profit based on some better search and display trends last quarter, though there is still a great deal of concern about slow to little growth, and about encroachments on Yahoo!’s turf from Google (GOOG) and Facebook.
Estimates have been on the rise of late, and the Street is modeling $1.2 billion in revenue and 17 cents in GAAP EPS last quarter. Cost-cutting initiatives remain one of the bright spots, with Yahoo! having announced two weeks ago it will lay off 2,000 people, or 14% of the work force.
CEO Scott Thompson is nearing the 100-day mark, analysts note, and so they are hoping to hear more on tomorrow’s conference call following the report about Thompson’s “strategy” to return the company to growth and fend off the competition.
And of course, the company’s ongoing battle with 5% investors Third Point LLC over board nominations also floats in the background here.
BGC Capital‘s Collin Gillis reiterates a Hold rating on the shares today. He’s projecting $1.085 billion and 19 cents a share. Display revenue may have risen 5%, year over year, to $494 million, while search revenue may have risen 1.9%, to $363.7 million, he thinks.
“Display growth remains under pressure from the audience-buying efforts from Google, and competition from Facebook in our opinion,” writes Gillis.
“We also see that the format is becoming antiquated and that Google is pushing fast to establish itself as the market leader in the ad display market given the accountability and transparency of purchasing on its exchange.”
Gillis is wondering if the new strategy might involve something regarding commerce or electronic payments, or both, given Thompson’s prior job running eBay‘s (EBAY) PayPal.
Meantime, J.P. Morgan’s Doug Anmuth reiterates a Neutral rating on shares of Yahoo!, and a $7 price target. He’s modeling $1.065 billion in revenue and 15 cents EPS, reflecting his view the “company has greater control over near term expenses relative to revenue.”
On the one hand, there’s been some more encouraging data from last quarter for search advertising, writes Anmuth, as “Some SEMs [search engine marketers] reported seeing search ad spend strength in the Yahoo!/Bing combined entity, based on better broad match and ad tools for advertisers.”
But comScore data still show Yahoo and Microsoft (MSFT) losing share to Google. He’s modeling just 0.4% growth in display revenue, year over year, to $473 million, and a drop of 1.7% in search revenue, year over year, to $351 million.
He, too, thinks the focus is on the strategy:
As Yahoo! is undergoing a major reorganization of its core operations with 2,000 layoffs announced, we believe investor focus has shifted somewhat to the core business and new CEO Scott Thompson’s pending strategy.
Yahoo! shares today are down 7 cents, or half a percent, at $14.80.