Facebook Inc (NASDAQ:FB) reports its December quarter earnings on Jan. 29, and Wall Street is expecting to see 27 cents per share on $2.33 billion in revenue. Hillside Partners analysts say the social network could post in-line results or maybe even results which are slightly ahead. However, they don’t think there will be a significant beat in Facebook’s December results because of a few factors.


Why Facebook might not post a big beat

Analyst Rory Maher reports that retail weakness earlier in the quarter probably contributed to Facebook Inc (NASDAQ:FB)’s latest quarterly results. The analyst said there were signs of strong ecommerce performance and usage stabilization, as well as increases in brand fans, but not until the end of the fourth quarter. Because of a rather weaker-than-expected fourth quarter for the offline retail sector, the firm puts a 30% chance on Facebook reporting quarterly earnings which are “significantly” ahead of consensus.

The Hillside team notes that 82 different brands managed to increase their Facebook fan base by over 20% during the quarter, which suggests that they probably did spend on advertising for fan acquisition. This amount is double the 41 brands which saw a comparable increase during the third quarter, although Maher believes these fourth quarter numbers are positively skewed because many media brands saw strong fan number increases. After adjusting for media, the analyst believes spending growth on fan acquisition was comparable to what it was in the third quarter.

Other expectations for Facebook’s results

According to Maher, Facebook Inc (NASDAQ:FB) is seeing usage grow more quickly than Twitter Inc (NYSE:TWTR) is even though it is actually a “more mature product” and Facebook has a larger user base than Twitter. In fact, Facebook outgrew Twitter in all categories except brands. According to Hillside’s data, the total number of fans or followers for the categories they track increased 3.9% in December for Facebook and 2.7% for Twitter. Maher believes that this means Facebook continues to have momentum in usage growth.

The analyst also reports that social media usage as a whole appeared to rebound after the first month when it declined. Facebook saw 114% growth in December, according to their estimates.

Bar may be set high for Facebook

One area of concern reported by Maher is newsfeed inventory management and its impact on advertising revenue growth for this year. The analyst reports that they looked into the probably drivers of growth in this area to estimate just how aggressive consensus estimates are in light of Facebook Inc (NASDAQ:FB)’s decision to keep newsfeed sellout the same this year as last year. After analyzing these areas, they think the bar is set pretty high for the social network in terms of achieving expectations this year. They note that in order to meet those expectations rates will have to rise “at a historically high rate given user growth and sellout trends.”

Shares of Facebook Inc (NASDAQ:FB) rose as much as 1% in early trading.