Google (GOOG) reported FQ4 2013 earnings after the close on Thursday. Analysts had lofty expectations for Google after they blew estimates out of the water last quarter. According to a December report by Amazon (AMZN) owned web traffic data company Alexa, Google is the most visited website on the internet.
Google may have missed Wall Street expectations on profit, but their revenue was great. Perhaps the most important piece of information from their earnings release was that paid click advertising revenues were up 31%. Google did not post monster profit numbers this quarter but it really doesn't matter.
The company aggressively reinvests money it makes back into itself allowing its all-star team to tackle some of the most challenging problems the world faces. This quarter Google announced capital expenditures of $2.3 billion, or nearly 17% of its total revenue. Google is committed to innovation and among other things they are working on, they may redefine the automotive industry with driverless cars in the not so distant future.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
This quarter Google missed profit expectations from both Wall Street and Estimize.com. Over the previous 2 years Google's profit has been all over the place. While profit numbers have been difficult to forecast, revenue has been growing rapidly thanks to increasing online advertising. Total sales have exceeded analyst expectations in the past 2 quarters.
While banks and the sell-side analysts come up with their own profit consensus numbers, these forecasts don't always represent the market's actual expectations. That's why we launched Estimize where we crowd source earnings expectations from hedge funds, money managers, independent research shops, students, and non-professionals to get a better sense of what the market is actually expecting. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
Normally when a company misses the market's profit expectations, the stock prices tends to drift downward over the next 3 trading days once the market reopens. Investors have expectations for a company that are baked into the stock price, when that company reports either a beat or a miss against the Estimize consensus the stock price tends to react accordingly. In the case of Google, we need to look at things differently. Investors were satisfied with the company's earnings report despite missing the consensus expectation on profit. GOOG stock was up over 4% in after hours activity in response.
Google is not a company that's interested in giving out dividends or doing stock buybacks to make whiny activist investors happy. Google has more data and more wicked smart employees than anybody else and they know it. Betting on themselves is a logical move and investors were wise to react positively to this earnings report. Google is going to continue to shape the way we experience the world through technology.