Google Seen Posting Strong 3Q Results After Close
By Mark Boslet, Of DOW JONES NEWSWIRES
PALO ALTO, Calif. -(Dow Jones)- Analysts are looking for strong third-quarter earnings from Google Inc. (GOOG) following signs the search advertising market didn't slow as much this summer as some initially feared.
The Mountain View, Calif., Internet company is expected to post pro-forma earnings of $1.36 a share and net revenue of $942.9 million for the September- ending period, according to a Wall Street consensus.
Analysts say the online search provider could top these numbers when it reports after market close Thursday. One piece of evidence they point to is Yahoo Inc.'s (YHOO) third-quarter earnings, which the Internet rival posted Tuesday.
Yahoo said net revenue climbed 42% to $932 million and gross profit rose 41%. "It's clear from Yahoo's numbers search continues to be very strong," says Youssef Squali, an analyst at Jefferies & Co.
Squali estimates that Yahoo's search advertising business increased 7% from the second quarter. Meanwhile, Wall Street projects Google's revenue will rise 6% from second-quarter net revenue of $890 million. In the past Google's advertising business has grown faster than Yahoo's, says Squali. "I don't see any reason why that should not happen again."
Squali is looking for above-consensus earnings of $1.41 a share. He doesn't own any Google stock, and Jefferies doesn't perform banking business for the company.
Another bullish outlook comes from Piper Jaffray analyst Safa Rashtchy. Rashtchy expects Google to post revenue growth from the second quarter of at least 7.5%, according to a research note published Monday.
On a July conference call following the release of second-quarter results, Google executives warned that seasonal summertime vacation schedules could slow the company's growth, especially in Europe.
"We believe the seasonality of Q3 was much less than what the company and most investors were expecting," says Rashtchy, who doesn't own stock in Google, but whose firm has conducting banking business for the company in the past 12 months.
Rashtchy is looking for pro-forma earnings of $1.43 a share, according to the note.
Expectations are high, says Philip Remek, an analyst at Guzman & Co, who doesn't own Google shares or perform banking business for the company. Remek says he is taking a wait-and-see approach to the seasonal concerns.
"I'm very curious to see if that materialized," he says. "I'm a little cautious here."
Remek says he is looking for net revenue of $933 million.
In the third quarter of 2004, Google posted net income $52 million, or 19 cents a share, on revenue of $805.9 million. Net revenue, obtained by subtracting traffic acquisition costs paid to partners who post Google ads, was $503 million.
-By Mark Boslet, Dow Jones Newswires, 650-496-1366;
mark.boslet@dowjones.com
(END) Dow Jones Newswires
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