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Google Increases Sales but Misses Revenue Estimate

Google (Nasdaq: GOOG  ) reported earnings on Jan. 22. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Google missed estimates on revenues and met expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly and GAAP earnings per share increased.

Margins contracted across the board.

Revenue details
Google reported revenue of $14.42 billion. The 20 analysts polled by S&P Capital IQ predicted sales of $15.38 billion on the same basis. GAAP reported sales were 36% higher than the prior-year quarter's $10.58 billion.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $10.65. The 34 earnings estimates compiled by S&P Capital IQ predicted $10.56 per share. GAAP EPS of $8.62 for Q4 were 4.9% higher than the prior-year quarter's $8.22 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 56.9%, 810 basis points worse than the prior-year quarter. Operating margin was 23.5%, 960 basis points worse than the prior-year quarter. Net margin was 20.0%, 560 basis points worse than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $15.23 billion. On the bottom line, the average EPS estimate is $10.73.

Next year's average estimate for revenue is $64.62 billion. The average EPS estimate is $46.51.

Investor sentiment
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 15,510 members out of 18,000 rating the stock outperform, and 2,490 members rating it underperform. Among 3,617 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 3,264 give Google a green thumbs-up, and 353 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Google is outperform, with an average price target of $800.97.

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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool recommends Google. The Motley Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (0)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 23, 2013, at 9:23 AM, Resphigi wrote:

    Google mimics Amazon. They always have higher sales, but have razor thin profits. They don't know how to make money. One of these days, investors will come to their senses and crush these stocks.

  • Report this Comment On January 23, 2013, at 11:43 AM, RuggedGuy wrote:

    The positive investor sentiment for Google seems significantly overdone. While margins did decline YOY, we must acknowledge that earnings beat while revenue missed. This indicates the street was expecting weak margins. The real issues with Google continue. Investors pay a big premium for the earnings of a company which lacks a clear strategic focus, pays no dividend, gives no control to the shareholders (Brin, Page, and Schmidt have controlling interest), has no presence in the world's second largest and fastest growing economy, and is a one trick profit pony with advertising as their only substantive source of revenue and/or profits. Google is one breakthrough new search algorithm away from obsolescence if someone else comes up with the algorithm.

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