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Should You Buy Alphabet Inc. (GOOGL) Ahead of Earnings?
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Shares of Alphabet Inc. (GOOGL - Free Report) were up marginally in morning trading Wednesday, just one day ahead of the company’s fiscal fourth-quarter earnings announcement. The Google parent often serves as an indicator for the entire technology sector, and investors can be sure that Wall Street will be paying close attention to its report.
Alphabet shares touched a new high closing price of $1,187.56 on Friday. The stock is down slightly since then, but for all intents and purposes, GOOGL will be hovering near its all-time peak when the company reports on Thursday.
The internet behemoth has reached new heights on the back of continued strength in its core search business and strong growth in emerging tech businesses. Today, Google and the other subsidiaries under the Alphabet umbrella sit on the cusp of dominance in several booming industries, including cloud computing, mobile payments, ecommerce, consumer electronics, and artificial intelligence.
Latest Outlook
Based on our latest consensus estimates, we expect Alphabet to report adjusted earnings of $10.12 per share and revenues of $25.67 billion, which would represent year-over-year growth of 8% and 30%, respectively. But of course, earnings and revenue are just two of the many things investors will be looking at in Alphabet’s report.
Investors should also prepare to study the performance of the company’s key business segments. For this, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Interestingly, our consensus estimate file is indicating that Alphabet’s “Google other revenues” category could be its most exciting growth catalyst. This unit includes revenues from the company’s Google Play Store, as well as its Google Cloud offerings and hardware initiatives like Google Home and Pixel.
According to our latest consensus estimates, Alphabet is expected to report Google other revenues of $4.61 billion, which would mark growth of about 35.6% from the year-ago period.
Meanwhile, Alphabet will also likely report impressive growth in its mysterious “Other Bets” unit. Alphabet uses this segment to lump together its smaller projects, and for the most part, these projects don’t generate much revenue. But subsidiaries like Google Fiber, Nest, and Verily do add to the company’s top line.
Our consensus estimate file is calling for Other Bets revenues to come in at $362 million. That result would represent growth of 38.2% year-over-year. Still, this category is just a small drop in the bucket for Alphabet.
Earnings ESP Whispers
Investors will also want to anticipate the likelihood that Alphabet surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
As we approach its report date, Alphabet is sporting a Zacks Rank #3 (Hold) and an Earnings ESP of 0.45%. This is because the company’s Most Accurate Estimate for earnings sits at $10.17 per share, meaning that the most recent analyst estimates have been higher than the consensus. This improved outlook is a good sign heading into the report.
Price Performance and Surprise History
Another important thing to consider ahead of Alphabet’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.
Alphabet has met or surpassed earnings estimates in three-consecutive quarters, but the company did not have an impressive earnings surprise history prior to 2016. Of course, this rocky history extends back to before the switch to the “Alphabet” structure. In recent quarters, analyst expectations have been managed.
But earnings surprises are still not a great indicator of whether the stock will move higher. Instead, investors should expect guidance to move GOOGL. Guidance can be unpredictable, but we have seen that the recent U.S. tax reform has lifted earnings outlook for the next few quarters.
Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Should You Buy Alphabet Inc. (GOOGL) Ahead of Earnings?
Shares of Alphabet Inc. (GOOGL - Free Report) were up marginally in morning trading Wednesday, just one day ahead of the company’s fiscal fourth-quarter earnings announcement. The Google parent often serves as an indicator for the entire technology sector, and investors can be sure that Wall Street will be paying close attention to its report.
Alphabet shares touched a new high closing price of $1,187.56 on Friday. The stock is down slightly since then, but for all intents and purposes, GOOGL will be hovering near its all-time peak when the company reports on Thursday.
The internet behemoth has reached new heights on the back of continued strength in its core search business and strong growth in emerging tech businesses. Today, Google and the other subsidiaries under the Alphabet umbrella sit on the cusp of dominance in several booming industries, including cloud computing, mobile payments, ecommerce, consumer electronics, and artificial intelligence.
Latest Outlook
Based on our latest consensus estimates, we expect Alphabet to report adjusted earnings of $10.12 per share and revenues of $25.67 billion, which would represent year-over-year growth of 8% and 30%, respectively. But of course, earnings and revenue are just two of the many things investors will be looking at in Alphabet’s report.
Investors should also prepare to study the performance of the company’s key business segments. For this, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Interestingly, our consensus estimate file is indicating that Alphabet’s “Google other revenues” category could be its most exciting growth catalyst. This unit includes revenues from the company’s Google Play Store, as well as its Google Cloud offerings and hardware initiatives like Google Home and Pixel.
According to our latest consensus estimates, Alphabet is expected to report Google other revenues of $4.61 billion, which would mark growth of about 35.6% from the year-ago period.
Meanwhile, Alphabet will also likely report impressive growth in its mysterious “Other Bets” unit. Alphabet uses this segment to lump together its smaller projects, and for the most part, these projects don’t generate much revenue. But subsidiaries like Google Fiber, Nest, and Verily do add to the company’s top line.
Our consensus estimate file is calling for Other Bets revenues to come in at $362 million. That result would represent growth of 38.2% year-over-year. Still, this category is just a small drop in the bucket for Alphabet.
Earnings ESP Whispers
Investors will also want to anticipate the likelihood that Alphabet surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
As we approach its report date, Alphabet is sporting a Zacks Rank #3 (Hold) and an Earnings ESP of 0.45%. This is because the company’s Most Accurate Estimate for earnings sits at $10.17 per share, meaning that the most recent analyst estimates have been higher than the consensus. This improved outlook is a good sign heading into the report.
Price Performance and Surprise History
Another important thing to consider ahead of Alphabet’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.
Alphabet Inc. Price, Consensus and EPS Surprise
Alphabet Inc. Price, Consensus and EPS Surprise | Alphabet Inc. Quote
Alphabet has met or surpassed earnings estimates in three-consecutive quarters, but the company did not have an impressive earnings surprise history prior to 2016. Of course, this rocky history extends back to before the switch to the “Alphabet” structure. In recent quarters, analyst expectations have been managed.
But earnings surprises are still not a great indicator of whether the stock will move higher. Instead, investors should expect guidance to move GOOGL. Guidance can be unpredictable, but we have seen that the recent U.S. tax reform has lifted earnings outlook for the next few quarters.
Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>