Low Expectations (Again) for Google Earnings

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Google (GOOG) is expected to report earnings on Thursday, July 16th. The whisper number is $6.61, nine cents behind the analysts’ estimate and showing little confidence from the WhisperNumber community. Whispers range from a low of $6.50 to a high of $6.72. Google has a 60% positive surprise history (having topped the whisper in 26 of the 43 earnings reports for which we have data).

Earnings history:

– Beat whisper: 26 qtrs
– Met whisper: 0 qtrs
– Missed whisper: 17 qtrs

The ‘low’ whisper number expectation should not come as a surprise. Investors had come to expect blow out numbers quarter in and quarter, and when that stopped so did the excitement that came with a Google earnings report. Over the past six quarters, Google has reported earnings short of the whisper number expectation in five reports. Another factor – Google’s stock price is trading at the same levels as one year ago. Investor’s and traders want earnings growth, and right now Google is not delivering.

Our primary focus is on post earnings price movement. Knowing how likely a stock’s price will move following an earnings report can help you determine the best action to take (long or short). In other words, we analyze what happens when the company beats or misses the whisper number expectation.

The table below indicates the average post earnings price movement within a one and thirty trading day timeframe:

GOOG715A

The strongest price movement of +0.7% comes within thirty trading days when the company reports earnings that beat the whisper number, and -6.6% within thirty trading days when the company reports earnings that miss the whisper number. Although the strongest price moves are as expected, the overall average post earnings price move is very limited and ‘negative’ (beat the whisper number and see weakness, miss and see weakness) when the company reports earnings.

The table below indicates the most recent earnings reports and short-term price reaction:

GOOG715B

The company has reported earnings ahead of the whisper number in one of the past four quarters with a whisper number. In the comparable quarter last year the company reported earnings twenty-four cents short of the whisper number. Following that report the stock realized a 0.4% gain in five trading days. Last quarter the company reported earnings two cents short of the whisper number. Following that report the stock realized a 3.1% loss in one trading day, before turning and seeing a 1.1% loss within one trading day. Overall historical data indicates the company to be (on average) a ‘negative’ price reactor when the company reports earnings.

WhisperNumber provides detailed earnings analysis and earnings trade alerts. Learn more here.

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