Yahoo shares climb in premarket amid improved profit margins, expense controls

Ahead of the Bell: Yahoo shares rise

NEW YORK — Yahoo Inc. shares rose in premarket trading Wednesday after the company posted strong profit margins for the third quarter.

Yahoo’s online advertising sales are still weak, but job cuts and a one-time boost from the sale of a noncore business helped lift earnings to $186 million from $54 million a year ago.

The Sunnyvale, Calif. company’s shares climbed 73 cents, or 4.3 percent, to $17.90 ahead of regular trading.

In a note to investors, Credit Suisse analyst Spencer Wang said Yahoo’s results “show good expense control and that the overall ad market continues to stabilize.”

Wang said Yahoo’s share-price performance will hinge on whether the company can get ad sales growing again — beyond the expected lift from a recovering economy.

Yahoo’s revenue for the quarter was down 12 percent from the year before, just a little better than the 13 percent drop seen in the first half of the year. The company’s main rival, Google Inc., boosted sales by 7 percent in the same period.

As recently hired CEO Carol Bartz leads the company’s turnaround effort, analysts have split on Yahoo’s outlook.

Heath Terry, of FBR Capital Markets reiterated an “Underperform” rating for Yahoo, arguing the company’s loss of market share in the online-search business and other segments will continue to leave Yahoo behind the competition.

On the other hand, Jefferies & Co.’s Youssef Squali said that Yahoo’s plans for improving the quality of its Web properties and advertising give it some “wiggle room to outperform.” He has a “Buy” rating on the stock. Wang maintained a “Neutral” rating.