LinkedIn Earnings Preview: Another Beat Expected

By Michelle Jones

LinkedIn Corp (NYSE:LNKD) is scheduled to release its next earnings report on July 31, and analysts are generally expecting the company to beat estimates. Of course this is nothing new, as the social network has a history of conservative guidance and earnings beats. 

LinkedIn usually beats

In a report dated July 24, 2014, Sterne Agee analysts Arvind Bhatia and Brett Strauser note that LinkedIn has beat the midpoint of its revenue guidance by 7% and its EBITDA guidance by about 19%. This is why consensus estimates for the social network are usually higher than the high end of management’s guidance. But even in spite of LinkedIn’s history of beating its own guidance, it still has managed to surpass consensus estimates for revenue by an average of 3% and EBITDA estimates by 12%.

The analysts say if this trend continues, the social network could post revenue of $527 million and adjusted EBITDA of $127 million.

What investors should look for in LinkedIn’s results

The Sterne Agee analysts said they believe investors are mostly trying to gauge how quickly LinkedIn is growing. They think investors will be looking for the possibility of top line deceleration, which has been a big reason for the social network’s multiple contraction. They also say investors looking for signs that the company’s growth rate increase due to Sales Navigator and also for China to become one of LinkedIn’s top new markets in the long term.

They note that the company saw a reacceleration in membership growth recently and say that investors will want to see what the main drivers for that reacceleration were and also gain understanding about whether this trend is sustainable.

LinkedIn’s key metrics

The analysts are estimating that LinkedIn added about 16 million members during the June quarter, bringing its total to nearly 312 million. They’re expecting a 2% quarter-over-quarter increase in page views as they think engagement is still strong.

They’re expecting a 43% year-over-year and 6% quarter-over-quarter increase in Talent Solutions revenue. They say the main driver will likely be an increase of 37% in the total number of customers. They project 27,662 customers, compared to 20,256 in the same quarter a year ago. The other driver for Talent Solutions is a 3% increase in revenue per Corporate Solutions customer, they believe.

In Marketing Solutions, they’re looking for a 26% year-over-year revenue growth, which would be a deceleration from the previous quarter’s 36% growth. The Sterne Agee team projects a 43% year-over-year increase in Premium Subscriptions. They expect the main driver to be a 31% increase in membership and an increase in adoption within the membership base.

They believe U.S. revenue will make up 60% of the mix or $302 million, which would be a 35% year-over-year increase. They estimate international revenue at $204 million, which would be a 46% increase.

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