UBS Global Research analysts Eric J. Sheridan, Vishal J. Patel and Timothy E. Chiodo rate AOL, Inc. (NYSE:AOL) as a Buy as the company announces better than expected earnings for 4Q13 across the board.

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AOL gross revenues beat street estimates

AOL, Inc. (NYSE:AOL) reported Q4 ’13 gross revenues of $679mm (vs. our est. of $667mm & Street estimate of $656mm) for 13% growth YoY. Net revenue was $508mm (vs. our est. of $518mm) for growth of 2% YoY on higher than expected TAC ($172mm vs. $149mm). OIBDA: Adj. OIBDA was $147mm (vs. our est. of $134mm & Street est. of $136mm), 19% growth YoY. GAAP EPS was $0.43 (vs. our est of $0.40 and Street est. $0.47). We note that AOL incurred $13.2mm of pre-tax restructuring costs and related to reduction of personnel, including Patch. The company repurchased 0.9mm shares in Q4 for $32.6mm, and has $115mm left in its current share repurchase authorization.

AOL’s OIBDA margin beat

AOL, Inc. (NYSE:AOL) reported segment revenues and Adj. OIBDA as follows: Brand Group: Revenues of $222mm (vs. our est. of $231mm) and OIBDA of $36mm (vs. our est. of $13mm). Membership Group: Revs of $209mm (vs. our est. of $212mm) and OIBDA of $146mm (vs. our est. of $145mm). AOL Networks: Revenues of $275mm (vs. our est. of $250mm) and OIBDA of $6mm (vs. our est. of $10mm). We note that Third Party Network revs grew 20% excluding Adap.tv. Corporate: Corporate & Other costs were $40mm vs. (vs. our est. of $35mm).

Key questions for the conference call: 1) contribution of Adap.tv and plans to scale this asset going forward; 2) impact of partnership with Hale Global on Patch; 3) update on video advertising efforts in both Brand Group & AOL Networks; 4) uptake of Gathr subscription packages; 5) thoughts on shareholder returns.

AOL’s valuation

Our $48 price target for AOL, Inc. (NYSE:AOL) is based on our weighted average framework (EV/Sales, EV/EBITDA, EV/FCF). We will be reviewing our price target and estimates after the conference call.