Google (GOOG) Q4 Preview: Wide EPS Range Creates Headline Risk

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Google, Inc. ( GOOG ) is flat at $704/share ahead of fourth quarter results after the bell.


Analysts on average are looking for the Internet giant to post EPS of $10.52 on revenues of $13.36 billion, representing growth of 11% and 52% respectively. It should be noted that the EPS range is very wide at $8.78-$11.91, which is likely related to MMI.

Data from EPS Insider shows that over the past four quarters, Google has missed EPS two out of the past four quarters by an average of 5%. The average move in the stock one week after earnings over the past four quarters is a decline of 7%. Shares are down 6.5% since posting Q3 results on October 18th.

Top-rated Google analyst Kerry Rice of Needham & Company recently previewed the upcoming quarter. He expects the company to report net revenue of $12.44 billion (ex-TAC), in-line with consensus, and EPS of $9.92 vs. consensus of $10.62 (it has since moved lower). Rice notes, "EPS estimates range from $8.78 to $11.90, which, we believe, largely reflects lack of consensus around what MMI and recent rationalization will mean for bottom line."

The analyst said despite the potential for a miss, there is a lot to like about the stock going into the print. "For one, it appears that the company is rapidly rationalizing the Motorola business in order to, in our view, set up a Design House focused on R&D and ensuring the competitive nature of Android devices being introduced to the market. Over the last two months, the company has agreed to sell off the entire Motorola Home business to ARRIS, while divesting key manufacturing facilities of its Motorola Mobile business. We believe these two transactions will be significantly favorable to the company's overall margin structure and refocus the company's efforts on the mobile front. Secondly, we view the FTC ruling on Jan 3, 2013 to be very positive for Google as it removes a cloud of uncertainty, which had been hovering over the company for nearly 2 years, regarding the company's competitive practices, especially in their relation to search. We believe this ruling should embolden Google to use search to further enhance its competitive position across social, mobile, e-commerce, and local."

He reiterated a Buy rating and $825 price target.

Google normally posts results at right around 4PM ET. Stay tuned to EPS Insider for analyzed results within seconds of their release.

Google will hold its quarterly conference call to discuss fourth quarter 2012 financial results on Tuesday, January 22nd at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). The live webcast of Google's earnings conference call can be accessed at investor.google.com/webcast.html



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Earnings , Stocks

Referenced Stocks: GOOG

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