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Will Google (GOOG) Beat Earnings Estimates This Quarter?

Zacks Equity Research

Google Inc. (GOOG) is set to report second quarter 2013 results on Jul 18. Last quarter, it posted a 13.25% positive surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Google’s gross revenue in the first quarter of 2013 was down sequentially but up from the year-ago year quarter. Additionally, Google’s strong position in the mobile segment enabled it to generate strong mobile revenue growth. Google reported a gross margin of 57.9%, which was up sequentially due to a favorable mix.

The company’s success in the tablet market, initiatives in the e-commerce segment (both retail and payment platforms), its Google Fibre initiative and its Nexus and Chromebook platforms are quite encouraging. We believe Google’s growth strategies and solid execution will help the company to continue on the growth path.

Earnings Whispers?

Our proven model does not conclusively show that Google will beat earnings this quarter. That is because a stock needs to have both a positive earnings expected surprise prediction or ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 or #3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: The Most Accurate estimate stands at $8.89 per share while the Zacks Consensus Estimate is higher at $9.04. That is a difference of -1.66%.

Zacks Rank #3 (Hold): Google’s Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:  

  • Sandisk Corp. (SNDK), with an ESP of +4.55% and a Zacks Rank #1 (Strong Buy)
  • Syntel Inc. (SYNT), with an ESP of +3.81% and a Zacks Rank #1 (Strong Buy)
  • Scientific Games Corp. (SGMS), with an ESP of +100.0% and a Zacks Rank #3 (Hold)

Read the Full Research Report on GOOG

Read the Full Research Report on SNDK

Read the Full Research Report on SGMS

Read the Full Research Report on SYNT

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