July 21, 2010 / 8:50 PM / 9 years ago

UPDATE 4-EBay 2nd-qtr profit beats Street, trims 2010 outlook

* Q2 adjusted EPS 40 cents vs Street’s 38 cents

* Q2 revenue up 6 percent

* Slightly lowers high end of 2010 outlook

* Shares up 3.6 pct (Adds adjusted revenue)

By Alexandria Sage

SAN FRANCISCO, July 21 (Reuters) - Internet commerce company eBay Inc’s (EBAY.O) second-quarter profit beat Wall Street estimates, helped by a record performance at its PayPal online payments unit and marketplace division sales in Europe.

Ebay’s shares rose 3.6 percent after hours as it predicted PayPal results would remain strong through the year.

But the company warned on Wednesday that a stronger U.S. dollar would hurt full-year results and it trimmed the high end of its 2010 forecast.

Ebay’s net profit was $412 million, or 31 cents per share, compared with $327 million, or 25 cents per share, a year ago.

On an adjusted basis, earnings per share were 40 cents compared with 37 cents a year ago. Analysts, on average, had expected adjusted earnings of 38 cents per share, according to Thomson Reuters I/B/E/S.

Ebay’s earnings “reflect both the recovery in the economy and the company’s effort to move toward fixed price offerings,” said Benchmark Capital’s Fred Moran.

“The fact that eBay’s top line has rebounded to a mid-teens revenue growth rate is representative of the recovery being seen in e-commerce, and clearly reflects well on Amazon (AMZN.O) showing powerful growth in its report tomorrow,” he said.

Revenue rose 6 percent to $2.2 billion. Analysts on average, had expected revenue of $2.16 billion, according to Thomson Reuters I/B/E/S. The company had a 15 percent gain in adjusted revenue, which excluded Skype, eBay’s former Internet telephone unit, which it recently sold.

Net revenue rose 6 percent to $2.2 billion. Analysts, on average, had expected revenue of $2.16 billion, according to Thomson Reuters I/B/E/S.

Gross merchandise volume, which measures the total value of goods sold on eBay, rose 2 percent in the quarter, excluding vehicle sales.

Chief Executive John Donahoe told analysts on a conference call the company was “cautious for the second half of the year in the United States in terms of the macro environment.”

EBay has been striving to convince investors that, midway through a three-year turnaround, it is improving its marketplaces unit. That unit joins sellers with buyers and now focuses mostly on full-price, rather than auction-type, sales.

“Users are coming back more frequently and they’re buying more. That is leading to new users,” Donahoe said. But he added that he was not satisfied with marketplace division results in the United States, the company’s “toughest and most competitive market.”

“However, we remain confident our turnaround is on track,” he said.

(See graphic: Ebay earnings link.reuters.com/tet78m)

LOWERS OUTLOOK

EBay said it now expects full-year revenue of $8.8 billion to $9.0 billion, below a previous forecast of up to $9.1 billion, on adjusted earnings of $1.60 to $1.65 per share.

The company previously forecast full-year adjusted earnings of $1.63 to $1.68 per share. Currency exchange rates are expected to hurt 2010 earnings per share by 9 cents to 11 cents, eBay said.

For the third quarter, eBay said it expects net revenue to rise 4 percent to 6 percent to $2.13 billion to $2.18 billion and adjusted earnings of 35 cents to 37 cents per share, compared with analysts’ forecast for 39 cents per share.

PAYPAL GROWS

EBay said its PayPal unit had added 1 million new accounts during each month in the quarter. It said PayPal has 87 million active accounts, growing “significantly faster” than e-commerce overall.

Donahoe said the company was aggressively expanding PayPal in Asia, including more options for mobile devices. So far 2.5 million people had downloaded PayPal applications, he said.

Analysts were expecting that the U.S. dollar’s strength against the euro would take a toll on the global company, where over half of revenue comes from abroad.

Shares of eBay are down 27 percent from a 2010 high of $27.56 in March. They rose to $20.90 after hours on Wednesday after closing down 3 percent at $20.17 on the Nasdaq. (Reporting by Alexandria Sage; Editing by Michele Gershberg and Phil Berlowitz)

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