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Google expected to show earnings gain

Published: July 19, 2012 | 8:06 am
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Analysts foresee messy report with Motorola results tucked in

SAN FRANCISCO — Google Inc. is expected to report double-digit gains in both revenue and earnings for the second quarter on Thursday afternoon, along with its first period of results from its acquisition of Motorola Mobility.

Investors have pressured the stock since the last earnings report, sending the shares down 7% since mid-April on concern about trends in the company’s core advertising business. Read more on Google’s previous results.

Google’s shares GOOG +0.70% have picked up about 4% since hitting a low point last month, but remain down 10% for the year-to-date.

“While most investors are generally bullish, we think concerns around two core areas have resulted in a lot of investors on the sidelines, in our opinion,” wrote Herman Leung of Susquehanna in a note to clients on Monday, referring to the company’s advertising business and its acquisition of Motorola.

“We expect to see signs of ad pricing recovery in [the second quarter] and also more transparency around Motorola,” he predicted.

Analysts currently expect Google to report adjusted earnings of $10.05 per share, compared with $8.74 per share for the same period last year, according to consensus forecasts from Thomson Reuters.

Revenues excluding the costs of traffic acquisition are expected to come in around $8.4 billion. That figure does not include contribution from Motorola. In last year’s second quarter, Google reported revenue of $6.92 billion.

Jason Helfstein of Oppenheimer predicted that U.S. revenues would slow down slightly on a sequential basis, with a bigger slowdown coming from international markets. But he added that concerns about losing out on revenue growth from user shifts to mobile devices is not the main problem.

“Aggregate third-party data shows stabilization in second-quarter pricing trends,” Helfstein wrote in a note. “This bodes well for the stock, as investors reacted negatively to the sharp deceleration in the first quarter.”

Regarding Motorola, Google says it plans to break out the newly acquired revenue, operating income or loss and cost of revenues for the unit’s two segments, which include wireless phones and cable set-top boxes.

Another question facing the company is the status of CEO Larry Page, who did not speak at the company’s annual shareholder meeting or its I/O developers conference last month, with the company saying he “lost his voice.”

Google previously said Page would also not do the earnings call on Tuesday.

“Why Mr. Page feels he can’t speak for 3-4 weeks is beyond us.” wrote Mark Mahaney of Citigroup in a note Monday. “Investors have put a Management Discount on Google’s multiple and this adds fuel to that fire, in our view.”


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