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The Zacks Analyst Blog Highlights: Google, Intel, Microsoft, IBM and Carnival

Zacks Equity Research

For Immediate Release

Chicago, IL – April 19, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Google (GOOG), Intel (INTC), Microsoft (MSFT), IBM (IBM) and Carnival Corporation (CCL).

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Here are highlights from Thursday’s Analyst Blog:

Google Posts Mixed, No Breakout Numbers


Search giant/household name Google (GOOG) reported Q1 earnings after the bell Thursday, with somewhat lighter results than expected. While the headline numbers of $14 billion and earnings of nearly $11.60 per share, it's important to account for a few things:

  1. Traffic Acquisition Costs (TAC). These were not deducted from Google's gaudily impressive revenue number of $13.97 billion, but let's subtract its nearly $3 billion ($2.96B) ourselves: this leaves Google with quarterly revenues of $11.01 billion, beneath the $11.24 billion we at Zacks had been expecting. So Google has missed on the top-line.
  2. Stripping out costs including a restructuring, but adding a gain from disc operations, the Zacks EPS actual for Google is $10.00 even. This easily beat the Zacks Consensus Estimate of $8.83, which was a number that had crept up in recent weeks from analyst revisions.

Thus, a textbook version of a mixed earnings report. The 13.25% positive surprise on the bottom line was Google's biggest beat of the past year, and can be attributed somewhat to an 8% effective tax rate, far less than the 18% Google reported in Q4 and a year ago.

Web and Network revenues were in line with expectations, as was the continued dip in "cost-per-click," which was down another 4% year over year, and marks the sixth quarter in a row Google has seen its average ad price rate drop. That said, the deceleration has eased notably of late, so one might cast this in a somewhat favorable light going forward.

Motorola Mobility revenues were less than expected, though this does not account for the recent sale of its set-top box operations to Arris for $2.35 billion, which occurred during Q2. Besides the 17,000 patents Google purchased when it bought Motorola Mobility, the company does not seem to have much use for all the hardware that came along with the deal.

That Google was unable to demonstrate strong revenue growth in the quarter fits the narrative of other big tech firms like Intel (INTC), and even two others that reported after Thursday's bell, Microsoft (MSFT) and IBM (IBM). Companies of this size and with this enormous breadth would indicate that the overall narrative of sluggish economic growth continues, both in the U.S. and globally.

As far as finding that big breakout in revenues for the tech sector, it's looking more and more like we'll have to wait until next quarter...

Carnival Plans $300M Initiative

Leading cruise operator and vacation company, Carnival Corporation’s (CCL) subsidiary Carnival Cruise Lines will introduce a new program to improve its fleet-wide efficiency and ensure better safety for its passengers. Carnival Cruise is likely to spend $300 Million to completely execute the program.

Under the program, Carnival Cruise will be involved in augmenting the efficiency of its engine rooms as well as its emergency power supply across its 24 ships. In addition, Carnival Cruise will also be installing a latest technology in all of its vessels to detect fire and take proper measures to control it. Apart from this, Carnival Cruise has also formed a Safety & Reliability Review Board to monitor its fleet-wide operations.

In the recent times, Carnival met one accident after another, which might compel the cruise operator to invest heavily in safely issues. Earlier in Feb 2013, the engine of Carnival Triumph carrying around 3,000 passengers caught fire in the Caribbean. Although there were no casualties, Carnival expects the voyage disruption and repair costs owing to the fire will hurt its earnings by around 8–10 cents per share during the first half of 2013.

Once more, in March, Carnival’s ship the Carnival Dream was docked in the Caribbean due to equipment problems, adding to the company’s woes. In mid-Jan 2012, Carnival’s ship, Costa Concordia met with a tragic accident on the west coast of Italy causing casualties. Although the recent Triumph disaster is much smaller in scale than the Concordia catastrophe, it might disrupt the near-term bookings of the company.

Following the Carnival Triumph fire disaster, Carnival has issued a rigorous review process for all of its 101 ships across 10 brands. Moreover, the company plans to invest nearly $600 to $700 million to improve its entire cruise operations and enhance guests’ satisfaction.

Carnival currently carries a Zacks Rank #5 (Strong Sell).

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