This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

EBay's $3 Billion Tax Charge Clouds Strong Earnings Growth

Updated from 4:29 p.m. ET to include second quarter outlook

NEW YORK (TheStreet) - EBay (EBAY - Get Report) beat a conservative first-quarter earnings guidance after it settled a very public two-and-a-half-month battle with billionaire activist investor Carl Icahn. However, the company took a $3 billion tax-related charge to earnings that may cloud strong first quarter operational performance at the e-commerce giant in a critical year of execution.

EBay reported a non-GAAP profit of 70 cents a share on revenue of $4.3 billion, beating core earnings forecasts. GAAP earnings were clouded by what eBay said was a "discrete tax charge" of about $3 billion on the repatriation of $6 billion in foreign profits.

On a GAAP basis, the company lost $1.82 a share for the quarter. That charge, a surprise to consensus, may have surprised some investors and analysts. eBay shares were falling more than 3% in after-hours trading.

EBay Earnings: All Quiet on the Russian Front?

Better than expected core earnings mean eBay has set a foundation to continue to post growth across its key Marketplaces, Enterprise and Payments divisions. Enabled commerce volume increased 24% in the first quarter to $24 billion, while mobile ECV increased 70% to $11 billion.


WATCH: More market update videos on TheStreet TV | More videos from Kori Hale

PayPal net payment volumes grew 27%, causing revenue to rise to $1.8 billion. The payment platform also added 5.8 million new users, or a 16% increase. eBay's Marketplaces division reported a 12% uptich in gross merchandise volumes and revenue of $2.2 billion. The company's eBay Enterprise division reported 16% gross merchandise sales growth, with revenue for the quarter rising to $269 million.

"We are executing our growth plans, capitalizing on the synergies in our portfolio and aggressively executing our $5.0 billion share buyback program," eBay CEO John Donahoe said in a statement. On Tuesday, eBay announced it had bought back $1.8 billion in stock for the quarter.

Discrete Charge

EBay said on Tuesday it took a $3 billion charge against its first quarter earnings in order to repatriate $6 billion in net foreign earnings. That move was intended to increase available U.S. cash and enhance the company's financial flexibility, eBay said.

In January, eBay said in January that it expected first-quarter net revenue in the range of $4.15 billion to $4.25 billion. San Jose-based eBay said it expected GAAP earnings in the range of 51 cents to 53 cents a share and non-GAAP earnings in the range of 65 cents to 67 cents a share, including a 1- to 2-cent dilution for the Braintree acquisition, which it completed in December.

Analysts had assumed at the time that the guidance would be easy to beat. According to Thomson Reuters, consensus estimates expect eBay to report earnings of 67 cents a share on revenue of $4.228 billion. Excluding the tax-related repatriation charge, eBay did beat earnings.

Bank of America analysts said eBay was their top stock pick in the e-commerce sector given a tough market for companies as large as Amazon (AMZN).

"We think the relative 1Q set-up is favorable due to positive CA data, conservative 1Q EPS guidance, aggressive share repurchase activity in1Q (28mn shares per eBay prelim. proxy), and likely focus on 1Q execution given recent shareholder activism," Bank of America analysts wrote on Monday.

The analysts did acknowledge a tough economic environment for tech sector earnings. "As we look forward, eBay has easier comps as the year progresses, a potentially improving environment in Europe and Korea, and hopefully the tech team has some product improvements planned after a disappointing 2013," the analysts added.

Second Quarter Guidance, Looming Activists

For the second quarter, eBay forecast new revenue in the range of $4.325-to-$4.425 billion and GAAP EPS of between 51 cents-to-53 cents. For the full-year, eBay now forecasts between $18 billion to $18.5 billion in revenue and $2.95-to-$3 in non-GAAP EPS.

Whether or not eBay's earnings results or full-year guidance can move the company beyond tussles with its investors is to be seen. Carl Icahn had no comment on eBay's earnings on Twitter, after quickly providing a positive reaction on Twitter to Apple (AAPL - Get Report) and Herbalife's (HLF) earnings.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $132.54 0.88%
EBAY $59.72 -0.03%
FB $80.54 0.07%
GOOG $540.11 -0.44%
TSLA $247.73 0.86%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs