What Drove Etsy’s Strong 4Q17 Bottom Line?



Bottom line improves year-over-year

Etsy (ETSY) reported adjusted EPS (earnings per share) of $0.15 in 4Q17, much better than analysts’ estimate of $0.09. The company’s reported EPS was $0.36 in 4Q17 compared with a loss per share of $0.19 in 4Q16. The bottom line benefitted from the US Tax Cuts and Jobs Act. The net income in 4Q17 included a $26.5 million tax benefit and came in at $44.8 million as against a net loss of $21.4 million in 4Q16.

The company’s bottom line performance was also driven by higher revenues and gross margin, which offset the impact from rising operating expenses. Operating expenses were up 5.7%, but the operating expense rate fell to 54.1% of the revenue compared with 63.3% of total revenue in 4Q16.

The company also has a share repurchases plan in place, which was announced in November 2017. Share repurchases enhance earnings per share by reducing the average share count. Under the buyback plan, the company repurchased shares worth $10.3 million in 4Q17.

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Where do peers stand?

Wayfair (W) reported adjusted loss per share of $0.58, much wider than analysts’ estimate of adjusted loss per share of $0.52 and $0.34 in 4Q16. A substantial increase in operating expenses offset the benefit from increased revenues.

eBay (EBAY) recently reported its 4Q17 results. It posted adjusted EPS of $0.59, which were in line with analysts’ expectations and up 9.3% on a YoY basis. The bottom line results were driven by the lower tax rate, share buybacks, and higher revenue, which offset the negative impact of foreign exchange headwinds.

Shopify (SHOP) reported adjusted EPS of $0.15, way ahead of the analysts’ estimate of $0.05 and its break-even earnings in 4Q16. Higher sales and higher gross margins cushioned the company’s bottom line despite rising operating expenses.


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