Google Inc., is among the first of the major technology names to deliver quarterly results for Q4 2011 after the close of trading on Jan. 19, and results are generally available within minutes after the closing bell, as a conference call is scheduled at 4:30 p.m. EST.
As the Internet’s most popular search engine and information gateway, Google is one of the world’s most powerful companies, and its quarterly earnings have a domino effects on millions businesses and people. A consensus of FactSet analysts expect earnings of $10.49 per share based upon revenue of $8.37 billion, after subtracting Google’s advertisement commissions and excluding expenses for employee stock compensation. In Q4 2010, Google earned $2.5 billion, or $8.75 per share on revenue of $6.37 billion, after subtracting advertisement commissions and excluding stock compensation.
The October to December period of 2011 is likely the first time that the Mountain View, Calif.-based Company will earn $3 billion in a single quarter due to more people buying gifts through computers and smartphones, and holiday season electronic commerce increased 15 percent from the 2010, according to the research firm comScore Inc.
A more detailed breakdown of the Q4 earnings preview is available after the break.
Deutsche Bank
-Watch for in-line Q4 results.
According to the global banking and financial services company’s “4Q Preview; Expect In-Line Results” company report, search checks show a solid Q4 search spending with net revenue equating to 30 percent Y/Y and 10 percent Q/Q. For Q4, a predicted gross revenue is $10.69 billion or 26 percent Y/Y, net revenue is $8.26 billion (consensus is $8.37 billion), the EBITDA is $4.68 billion or 34 percent Y/Y pro forma operating income of $4.04 billion or 19 percent Y/Y, and PF EPS is of $10.03 (consensus is $10.50).
“Our sets incorporate a deceleration in open growth to 41 percent Y/Y excluding non-cash comp (from 53 percent Y/Y last quarter) and EBITDA margins of 56.6-percent on net revenues, from 54.9-percent in 3Q and versus 59 percent in 4Q10.”
Bank of America Merrill Lynch
-Anticipate solid results with a paid click upside in Q4.
According to the corporate and investment banking division’s “4Q Preview: Strong Core US Business Expected” company report, strong Q4 results are forecasted (26 percent ex-FX revenue growth versus 25 percent in Q3), driven by paid click growth upside (versus the 25 percent estimate) on vertical search improvements and mobile strength. Europe is a potential offset due to Y/Y CPC deceleration, macro weakness and FX.
“With positive 4Q expectations for the U.S. business into the print and little clarity on Motorola, Europe, or other issues expected on the call, we expect a muted stock reaction to meet/beat 4Q results (not a big move up or down), with modest changes to 2012 estimates.”
Wells Fargo
-Emerging risks are believed to counterbalance core strengths.
According to the diversified financial services company’s “Equity Research: Google Inc” company report, six emerging headwinds could offset the secular growth drivers in the core business for 2012, such as: integration of Motorola Mobility; tougher comparable; negative impute from FX due to stronger dollar; potential for increased regulatory scrutiny; probable increase in operating expense to support adjacent growth initiatives as it battles competition; and, nominal room for multiple expansions. The valuation range is set between $620 and $640. The range is unchanged based on 14-15x FY2012 EPS of $44.
“In our view, the biggest challenge for Google is the peddling MMI acquisition. Large acquisitions in and of themselves are difficult, but we believe this one is outside of Google’s core competency and adds increased complexity to the Android ecosystem. We think Google acquired MMI or both the patents and the business. We do not expect them to spin-off MMI and believe they see value in having integrated devices like Apple. The inclusion of the lower margin MMI business means Google’s model will likely behind to look more like Apple’s. As such we the PE multiple will also track to Apple’s range of 12-14x.”
Needham
-Expect modest upside to expectations given growth in display and mobile.
According to the diversified financial services company’s “Equity Research: Google Inc” company report, search revenue should be modestly above expectations due to mobile searches propelling queries to record volumes. Nevertheless, lower Cost-per-Click rates should partially counterbalance the benefit of this volume growth.
“While U.S. core search queries increased 9 percent YoY in Q4 2011, strong mobile growth should push overall query growth above these expectations. However, mobile queries carry lower CPS rates, which we estimated to have a 6 percent decline in Q4 2011, partially offsetting the significant mobile growth. We believe international search growth was solid, but declined sequentially.”
Morgan Stanley
-Expect Google to report Q4 2011 net revenue and EBITDA Y/Y growth at 32 percent and 20 percent, respectively.
According to the global financial services firm’s “Google: CQ4 Earnings Preview ” company report, digital advertising agencies suggest the U.S. desktop market grew from the mid-to-high 20 percent range in Q4. Search in the U.K. and Europe green in the teens, and emerging markets increased in the double or low triple digits. However, they grew from a low revenue base. It is surmised that Google took revenue share in search for Q4, and it is assumed display, video, and mobile formats outgrew desktop search.
“While we expect some discussion of core search trends on the company’s Q4 2011 results calls, we can believe that the bulk management commentary may focus on newer initiatives, including Search plus Your World social integration, Android device activation, mobile revenue, performance display and video advertising formats.”
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