Google Inc (GOOG) Q1 Earnings: All Eyes On CPC Growth


Analysts and investors are expected to focus their eyes on Google Inc (NASDAQ:GOOG)’s CPC growth on its earnings report for the first quarter fiscal 2013. Goldman Sachs analysts believed that the search engine giant’s CPC growth is in line with their forecast based on their field work and currency movement.

Google Inc (GOOG) Q1 Earnings: All Eyes On CPC Growth

According to the Goldman Sachs analysts, they expect the search engine giant to post a 3 percent decline on CPC year-over-year compared to the 4 percent year-over-year constant currency decline reported by Google Inc (NASDAQ:GOOG) in the 4Q2012 (down 6 percent), and 3 percent (down 12 percent) year-over-year constant currency decline in 1Q, 2012.

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They noted that the Street is expecting Google Inc (NASDAQ:GOOG) to report a slightly better CPC than their consensus estimate of -3 percent year-over-year.

The analysts estimated that the search engine giant will report a 24 percent growth on paid per click year-over-year, in line with 4Q, 2012, compared with the 39 percent year-over-year growth posted in 1Q, 2012.

Goldman Sachs analysts observed that ad spending growth with Google Inc (NASDAQ:GOOG) is in line with the ad spending in the previous quarter, and in line with the expectations of their contacts.

Based on their checks, the search spend in January was flat to down year-over-year because it is the period when advertisers finalized their budgets for the year. According to them, search spend became stronger in February and March.

The analysts cited that Price Listing Ads (PLA’s) continue to drive incremental spend with lower but growing CPC’s and mobile remained a key driver for growth representing 25 percent of paid clicks, and 20 percent of spend on average.

Goldman Sachs analysts also expect that Google Inc (NASDAQ:GOOG) will face a larger sequential FX headwind during the quarter due to the weakening pound and yen vs. the dollar. The analysts cited that the search engine giant generated 53 percent or $26.6 billion of its consolidated revenues outside the U.S. Its revenue from the U.K. accounts for around 20 percent and 15 percent to 20 percent from Japan.

They estimated that Google Inc (NASDAQ:GOOG)’s sequential currency headwind to be around 150 bp, or approximately $230 million. In the next quarter, they expect the currency headwind to be around 275bp Q-o-Q and 350 bp Y-o-Y headwinds.

In their note to investors, Goldman Sachs analysts wrote, “Overall, we expect Google standalone revenues in line with consensus if not just slightly ahead, as our checks indicates ad spend with Google Inc (NASDAQ:GOOG) came in largely as expected for the quarter. That said, we continue to view Motorola as a potential risk to the downside as Google continues to work off the Motorola product pipeline that was in place when the deal closed. As well, the sequential currency headwinds is roughly $60 million higher than we expected at the beginning of the quarter.”

The analysts estimated Google’s revenue and non-GAAP EPS to be around $14.58 billion and $10.69, respectively. They expect the company’s standalone revenue at approximately $13.29 billion (+3 percent Q-o-Q and +25 percent Y-o-Y).

They expect Motorola’s contribution to be around $1.29 billion and its non-GAAP operating margin at 30.2 percent.

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