Google Disappoints, Hits Info Tech EPS Growth
Estimize | Oct 17, 2014 07:09AM ET
The markets turned out to be relatively dull today in comparison to yesterday’s volatility, with both the S&P 500 and DJIA ending flat. After the closing bell, earnings reports were released for 7 companies within the S&P 500, the most highly anticipated coming from Google (NASDAQ:GOOGL). Panic arose when the company not only missed earnings estimates, posting YoY EPS of $6.35, $0.20 below the Estimize consensus, but when cost per click (CPC) was also reportedly down 2% for the third quarter due to the mobile shift. The miss caused the overall expected growth rate for the IT sector to dip to 5.9% from 6.3% previously. Shares of Google dropped to $498.60 in the wake of the report, nearly a 5.5% decline from where it closed, prices have since recovered to $511.50 in the after hours.
We don’t think a 2% decline in CPC is a big deal, and here’s why. First off, many top tech analysts were expecting a decline, saying anything under 3% would be acceptable. Secondly, as seen in the chart below, the 2% drop was the lowest YoY CPC decline that Google reported in any of the previous 7 quarters.
Tomorrow we will get reports from Morgan Stanley (NYSE:MS) and General Electric Company (NYSE:GE), among others. Morgan Stanley is expected to post EPS of $0.57 and revs of $8.3B. General Electric is looking for EPS of $0.39 and revs of $37B.
How Are We Doing?
Expectations for S&P 500 earnings growth for the third quarter has risen to 9.2% in the last day due to some better than expected reports. Revenues are anticipated to come in with 4.3% growth. All 10 sectors are anticipated to post positive YoY growth on both the earnings and revenue front.
Leaders
Earnings:
Energy (14.0%). Notable industry: Oil, Gas & Consumable Fuels (15.3%)
Materials (11.9%). Notable industry: Metals & Mining (23.0%).
Consumer Discretionary (11.6%). Notable industry: Internet & Catalog Retail (22.7%)
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Revenues:
Health Care (9.9%). Notable industry: Biotech (38.3%).
Utilities (7.4%). Notable industry: Independent Power & Renewable Electricity Producers (21.9%)
Laggards
Earnings:
Utilities (3.3%). Notable industry: MultiUtilities (0.8%).
Telecommunication Services (4.7%): All five companies are within Diversified Telecom Services. Only Verizon Communications (NYSE:VZ) expecting YoY growth.
Revenues:
Energy (0.6%). Notable industry: Oil, Gas and Consumable Fuels (0.1%).
Materials (1.1%). Notable industry: Paper & Forest Products (16.3%).
Beat/Miss/Match
Earnings: 70 companies have reported thus far, 47% have beaten the Estimize consensus, 36% have missed and 17% have met. This is compared to Wall Street estimates, of which 64% of companies have beat on the bottomline, 26% have missed and 10% have met.
Revenue: 53% have beaten the Estimize consensus, 47% have missed, and 0% have met. For revenues, 66% of companies have beat the Wall Street estimate, while 34% have missed.
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