Google Inc (NASDAQ:GOOG) will release its next quarterly earnings report later this week and Goldman Sachs analysts believe it’s too early to see results from the full rollout of its Enhanced Campaigns platform. They expect the company’s standalone revenues to be in line with consensus and that growth in its core search business will continue to decelerate.
Google total results could be behind consensus
Analysts Heather Bellini, Heath P. Terry, Brian Baytosh and Sonya Banerjee issued a research note this week with their expectations for Google Inc (NASDAQ:GOOG)’s third quarter results. They remain Neutral on the search giant and suggest that the company’s results could be mixed this time around.
They’re looking for total revenue of $14.7 billion and earnings of $10.40 per share. That’s compared to consensus estimates of $14.84 billion in revenue with earnings of $10.35 per share. For standalone revenue, they’re estimating Google will have revenue of $13.7 billion, which is a 5 percent increase sequentially and a 14 percent increase year over year. For Motorola, they’re estimating $994 million in revenue, compared to Street estimates of $1.16 billion. They’re expecting operating margins of 29.7 percent, compared to consensus estimates of 30 percent.
Breaking down expectations for Google
The Goldman Sachs analysts note that Google Inc (NASDAQ:GOOG) released the Moto X during the third quarter, making it available for three to four weeks. They said the “roughly $165 million delta” between their estimate and consensus is about 825,000 units.
They also said their checks suggest ad spend at Google Inc (NASDAQ:GOOG) grew in line with last quarter on a year over year basis. They believe Product Listing Ads and mobile will continue to drive incremental advertising spending. They’re expecting 18 percent year over year growth in paid clicks, which is a 21 percent year over year decline from last quarter and compared to 33 percent decline year over year compared to the third quarter of last year.
They’re expecting cost per clicks to fall 2 percent year over year, compared to the 6 percent constant currency decline reported in the second quarter and 8 percent decline in the third quarter of last year. They see upside potential to their paid click forecast, however, and also potential for growth in cost per click to be lower than their estimates.
Google could dominate in the future
The analysts said they expect to see Google Inc (NASDAQ:GOOG) to post continued decelerating growth in its core search business plus margin contraction while it evolves its business model. They see the evolution as possibly making the search giant even more dominant in the future, but they think near-term margin contraction will result in the stock trading in a “relatively tight band.”
They have a $950 per share price target on Google Inc (NASDAQ:GOOG).