Good news for the economy. Just okay news for Google (GOOG)
After the market close on July 15 Google reported second quarter earnings of $6.45 a share. That was worse than the $6.52 Wall Street analysts had projected. The stock dropped 4.2% or $20.62 in after hours trading to $473.40.
The problem wasn’t revenue—which is good news for the U.S. (and global economy) since most of Google’s revenue comes from advertising and higher revenue means more advertisers are buying ads. Revenue climbed to $5.09 billion, up 25% from the second quarter of 2009. Analysts had forecast revenue of $4.99 billion.
Not only were more advertisers buying ads, but more people were clicking on them—another sign of healthy economic activity. The number of revenue-generating clicks on Google ads climbed 15% in the quarter from the second quarter of 2009.
And advertisers were willing to pay more for them. —the average price per ad click rose by 4% from the second quarter of 2009. (Although that 4% growth rate is lower than the growth rate in the first quarter of 2010 and the last quarter of 2009.
But rising operating costs at Google turned that revenue growth into slightly disappointing earnings. Google added 1,100 employees in the quarter. The company’s also spent $476 million on capital expenditures including data centers. That was more than three times the capital spending in the second quarter of 2009.
That probably wouldn’t have hurt the stock quite so badly except that the increase in expenses followed quarters where Google had worked hard to cut costs in response to Wall Street worries that the company, like many fast growing companies, had lost control of spending.
Google’s management has argued that now is the time to expand since the U.S. economy is on the rebound. But as we know from watching stocks struggle after hitting a high on April 23 Wall Street isn’t convinced that the U.S. economy isn’t going to slow more than Google now seems to expect.
Jim,
Thank you for explaining the background to GOOG’s earnings numbers. The fact that advertising revenue had continued to expand, and that GOOG’s increased payrolls and CAPEX spending was what made their numbers miss estimates, indicates that the situation is significantly better than it seems at first glance.
If GOOG, with their pervasive information apparatus and pulse on business advertising, thinks that now is a good time to expand their business, I expect that more companies will soon be following their lead.
java12jack…
I view this as a positive for TC! I’ve only found two articles that cover the acquisition, hope this helps. http://www.reuters.com/article/idAFN1520049720100715?rpc=44
Jeez bsdgv, you contradict the article and then refer to an chart that is definitely up. Rails, like inventory are short term cyclical but that monthly trend is very strong.
Javos…No matter …somthing bought..something sold.
Jim…obvious sign of financial strength and potential growth. Personnely I think the Chinese miners are going to kick yheir butt.
The more successful Google is, the fewer net jobs for the nation.
Further, in an economic downturn, corporations become innovative with cost-cutting, often using technology, and find that they can do well without adding back all the employees that they laid off.
> Look at railcar activity over the last year. Even Buffett is drooling at the increase.
CARLOADS DECLINE, RAIL TRAFFIC MODERATES FROM HIGHS
http://pragcap.com/carloads-decline-rail-traffic-moderates-from-highs
As many know, Google likes to do its own thing and ‘act independently’. One way Google management does this is by NOT giving earnings or revenue guidance, either during earnings announcements or at any other time. This is unlike most publicly traded companies. Given this lack of guidance, it’s easier for analysts to be ‘wrong’ on their estimates for Google. And historically analysts have been off on their estimates in some quarters – or as the market and investors saw it, Google missed the estimates in those quarters. Historically, Google seems to realize that they actually have shareholders after an earnings miss, and bounces back strongly the next quarter by soundly beating estimates. So their earnings miss yesterday actually might bode well for the next quarter. Disclosure: Long GOOG.
Evernew, I’m ignorant. What are the railcars carrying? And what has the increase done to OTR trucking volume, trucking revenue, and trucking jobs?
Good news for Google, bad news for “bricks ‘n mortar” retailers, and their employees.
My friends and I all buy online…Amazon, Ebay, etc., when we can. Very efficient use of technology, which I suspect costs jobs. That’s the point, isn’t it?
Jim
Off subject, what do you think of the TC buy of a junior miner Terrane?
Google is right and Wall St. is wrong. Look at railcar activity over the last year. Even Buffett is drooling at the increase.