AOL Posts Earnings, Announces Big Acquisition

Second-quarter EPS last year included the sale of patents to Microsoft Corp. (NASDAQ: MSFT) for a total of $1.04 billion.

AOL also announced this morning that it has agreed to acquire ad platform vendor Adap.TV for $405 million. It is AOL’s largest-ever acquisition and included $322 million in stock and $83 million in stock.

We will have to wait for the conference call for any guidance, but the consensus estimate for the third quarter calls for EPS of $0.36 on revenues of $539.72 million. For the full year, the estimate for EPS is $1.46 on revenues of $2.24 billion. The full-year EPS estimate has dropped by $0.15 a share since the end of the first quarter. The revenue estimate is unchanged.

The company’s CEO said:

AOL continued to get leaner during Q2 while growing consumer traffic, growing all advertising revenue lines, and improving our subscription trends.

Revenue in AOL’s membership group — the company’s largest revenue generator — fell 6% year-over-year, while the brand group (with properties like AOL.com and Huffington Post) saw a 10% jump in revenues. The brand group’s adjusted operating income rose 91%, but still posted a loss of $1.4 million. The membership group’s adjusted operating income fell 4%, but provided $151.6 million in income, the only one of the company’s divisions to post a profit.

AOL’s domestic subscriber base fell by 15% year-over-year in the quarter, and the company’s subscription revenue fell 5%.

AOL’s shares are trading up about 6% in the premarket this morning, at $38.40. The stock’s 52-week range is $29.16 to $43.93. The consensus target price for the shares was around $42.30 before today’s report.