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What to expect from Facebook’s earnings

Advertising revenue will be key to social-media company’s results

Facebook Inc. is scheduled to report its third-quarter results after the market closes on Tuesday. Here are some things for investors to look for in the report:

Earnings: Analysts surveyed by FactSet estimate Facebook FB, +2.13% will report a profit of 40 cents a share, excluding one-time items, compared with a profit of 25 cents a share in the same period a year ago.

Revenue: Facebook is expected to post $3.12 billion in sales for the quarter ended in September, which would be an increase of more than 54% from the $2.02 billion from last year’s third quarter.

Stock performance: This year has been a good one for Facebook shareholders, as the company’s stock price has risen 46% to around $80 a share. The S&P 500 index SPX, +1.23% is up about 5% over the same time period.

Other matters: Advertising has provided the lion’s share of Facebook’s total revenue for some time, and growth in ad sales will be a major factor in determining Wall Street’s sentiment toward Facebook in the last part of the year. During Facebook’s third-quarter a year ago, Facebook reported $1.8 billion in ad sales, while that amount rose to $2.68 billion in the company’s second quarter this year.

Earlier this month, Nanigans, one of Facebook’s preferred marketing developers, released the results of its latest advertising benchmark report on Facebook, which suggested increases in advertising click-through rates for the company during the third quarter. “We think this bodes well for overall advertising revenue growth on the Facebook platform [during the third quarter] and we believe creates potential for upside in revenue.”

Along those lines, growth in revenue from mobile ads will be viewed as a sign that Facebook’s mobile business is on the rise. During the third-quarter a year ago, mobile ads accounted for 49% of Facebook’s total advertising revenue, while it made up 62% of such sales during the second quarter of this year.

Rex Crum