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What's in the Offing for Alphabet (GOOGL) in Q1 Earnings?

Zacks Equity Research

Alphabet Inc. GOOGL is scheduled to report first-quarter 2019 results on Apr 29.

Notably, the stock outperformed the Zacks Consensus Estimate in all the trailing four quarters, delivering average positive surprise of 17.83%.

In the last reported quarter, Alphabet delivered a positive earnings surprise of 15.25%. Earnings of $12.77 per share decreased 2.2% sequentially but increased 31.6% year over year.

The Zacks Consensus Estimate for first-quarter earnings and net revenues is pegged at $10.37 per share and 29.98 billion, respectively.

Coming to price performance, the company’s shares have returned 24.5% in the past year against its industry’s gain of 8.6%.

Let’s see how things are shaping up for this announcement.

Search & Cloud Momentum to Aid Growth

Alphabet’s dominant position in the search world is anticipated to be a key catalyst for the company’s top-line growth.

Moreover, Alphabet’s continued focus on innovation of the search segment, which accounts for a major portion of the total revenues, will likelyenhance the segment’s results and drive traffic on its platform.

Google has been significantly gaining momentum in the highly-competitive cloud market over the last few quarters, which is a positive for the upcoming results.

The company partnered with MongoDB (MDB) and Elastic (ESTC) at its cloud conference, Google Cloud Next 2019. This move will strengthen Google Cloud’s open-source tools portfolio and help drive cloud revenues.

We believe that the company’s strong endeavors toward expansion of its cloud service portfolio and data centers will continue to benefit the adoption rate of Google Cloud. This remains a positive for the company’s first-quarter results.

Notably, its expanding portfolio of services will likely drive top-line growth in the soon-to-be reported quarter.

Concerns

Alphabet’s search advertising business is facing stiff competition from Amazon. In the cloud computing space, Google Cloud trails both Amazon and Microsoft MSFT. The increasing competition in both the markets is likely to hurt top-line growth in the to-be-reported quarter.

The company continues to face data privacy challenges, which remain a major concern. In addition, increased spending on its consumer gadgets, YouTube video app and cloud computing services remains a concern.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Alphabet currently has a Zacks Rank #3 and an Earnings ESP of -8.14%, which makes surprise prediction difficult.

Alphabet Inc. Price and EPS Surprise

 

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

Stocks That Warrant a Look

You may consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank.

Juniper Networks, Inc. JNPR has an Earnings ESP of +10.00% and holds a Zacks Rank #2.

Square, Inc. SQ has an Earnings ESP of +5.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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