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Alphabet (GOOGL): Will it Beat Earnings Estimates in Q4?

Alphabet Inc.GOOGL will report fourth-quarter 2016 earnings on Jan 26 after the bell.

The surprise history has been decent in Alphabet's case. The company missed estimates just once in the last four quarters, that too by a small margin.

Coming to the price performance, over the past one year, shares of Alphabet have been steadily treading higher. The stock has returned 12.89% compared with the Zacks categorized Internet Services industry's gain of 12.78%.

What Happened in the Last Reported Quarter?

Alphabet's third-quarter earnings surpassed the Zacks Consensus Estimate for revenues which also grew year over year. The increase was primarily driven by the boom in Mobile Search, with the ongoing strength in YouTube. Also, strength in programmatic advertising and Play aided revenue growth. Other Bets revenues remained lumpy.

Factors at Play in Q4

The main drivers of the Google business haven't changed. Pricing remains under pressure, both on account of the ongoing FX concerns as well as continued strength in mobile and TrueView. Volumes are however encouraging as total paid click growth was a reassuring 33% last quarter.

Google has gained strength in the mobile platform. Management is focused on driving mobile experiences and the company is well positioned to pick up strong intent-to-buy signals as a result of studying mobile searches from its huge database. As a result, revenue from mobile platform is expected to increase in the upcoming results.

YouTube remains a strong contributor benefiting from the increase in online video consumption. More than a thousand creators are currently engaged with the platform, bringing in a thousand subscribers every day.

Also, Google has turned more aggressive toward the commercialization of its self-driving cars. It aims to expand its revenues from this segment in the upcoming release. However, the current regulatory environment doesn't support fully automated cars, so there could be some problems on their part.

Google's cloud business trails Amazon's AWS, Microsoft's Azure and IBM. The company's cloud business is expected to well in the to-be reported quarter. And finally, Google platforms like Android, Chrome and Daydream continue to help it draw more users and sell more ads.

On a cautionary note, Google's troubles in the EU are mounting and despite its attempts to appease authorities by investing in the region, the region may prove much more expensive for it. Google is not providing for this outflow, which could mean that it still has a reasonable chance to come out victorious. But the developments are worth keeping an eye on as these are the main reasons for the overhang on the company's shares.

Earnings Whispers

Our proven model does not show that Alphabet will beat on earnings this third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

The company's Zacks Rank #2 and Earnings ESP of -0.26% make surprise prediction difficult. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

We don't recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement.

Alphabet Inc. Price and EPS Surprise

Alphabet Inc. Price and EPS Surprise | Alphabet Inc. Quote

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Seagate Technology plc STX , with an Earnings ESP of +1.87% and Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.

Corning Incorporated GLW , with an Earnings ESP of +2.27% and a Zacks Rank #2.

Microsoft Corporation MSFT , with an Earnings ESP of +1.28% and Zacks Rank #2.

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Seagate Technology PLC (STX): Free Stock Analysis Report

Microsoft Corp. (MSFT): Free Stock Analysis Report

Corning Inc. (GLW): Free Stock Analysis Report

Alphabet Inc. (GOOGL): Free Stock Analysis Report

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


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

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