After 3Q report, WebMD drops following big gains

NEW YORK - Shares of health site operator WebMD Health Corp. fell Friday, reversing two weeks of large gains after the company released its third-quarter report.

After trading concluded on Thursday, WebMD said its third-quarter profit dipped 6 percent, to $10.8 million, or 18 cents per share, from $11.5 million, or 19 cents per share. Revenue increased 17 percent, to $100.4 million from $86.1 million, but higher operating and sales costs, along with a larger income tax provision, pared those gains.

The results were about equal to analyst estimates. Thomson Reuters reports that analysts expected an average of 16 cents per share in profit on $100 million in revenue.

WebMD reported an average of 49.9 million unique viewers of its Web pages per month, with a total of 1.14 billion page views. Its online services revenue increased 19 percent, to $94.6 million, on strong growth in advertising and sponsorship revenue and improved private portal licensing revenue.

While analysts viewed the third-quarter results positively, Mark Mahaney of Citi Investment Research noted that the stock has surged over the last two weeks. In afternoon trading, the shares dropped $2.42, or 9.7 percent, to $22.45.

WebMD shares set an all-time low of $13.67 on Oct. 16, and through Thursday, were up 81.9 percent from that mark.

The company said its fourth-quarter profit will be between 16 and 19 cents per share, with $104 million to $108 million in revenue. Analysts expect 21 cents per share and $112.1 million in revenue.

Its 2009 forecast of 48 cents to 69 cents per share in profit from continuing operations, on $420 million to $450 million in revenue, compares to analysts' expectations of 67 cents per share on $435.3 million in revenue.

In a client note, Mahaney said the company's 2009 outlook is "solid." But since shares have equaled his price target, he doesn't think they merit a "Buy" rating after the recent gains. He cut his rating to "Hold," and raised his price target to $25 per share from $24 after making a slight increase in his profit estimates.

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