Friday, July 10, 2009

Google Seen Posting 2Q Growth, But At Slower Pace

Despite the troubled economy and sagging prices paid for the search giant's online advertising, Wall Street expects Google Inc. (GOOG) to issue an earnings report next Thursday showing profit and sales gains for the second quarter ended in June.

Still, the anticipated numbers are also thought to reflect a decline compared to first quarter, which ended in March.

Analysts expect Google to post second-quarter earnings excluding special items of $5.05 a share, and $4 billion in net revenue, according to estimates compiled by Thomson Reuters.

That compares to earnings excluding special items of $4.63 a share and $3.9 billion in net revenue for the same period a year earlier - which ended before the economy began dramatically tipping into a recession.

The expected results nonetheless reflect a decline from the first quarter, when Google posted earnings of $5.16 a share excluding items. Google itself doesn't offer financial guidance.

Justin Post, an analyst covering the company for Bank of America/Merrill Lynch, told clients Thursday he thinks Google will meet Wall Street's second-quarter expectations, though management's comments on trends in the overall economy will be of more interest. Post noted that Google Chief Executive Officer Eric Schmidt has made public statements recently indicating he feels the economy should begin to recover soon.

"The Street, in our view, is largely looking past [second-quarter] results and will be focused on management's tone and comments on the economy (as a gauge for cost-per-click outlook)," Post wrote in a report.

Post maintains a $480 price target for the company's shares. Google shares have risen more than 33% year-to-date, outpacing the Nasdaq Composite Index. The shares closed at $410.39 Thursday afternoon.

   Paid-Click Slowdown

Google's paid clicks, or the number of times Internet users click on the company's advertisements and generate revenue, are expected to have increased in the quarter compared to the period last year - though not quite at growth rates seen in the past. Post estimates that paid clicks grew 14% in the period, whereas they were growing at a rate of 20% as recently as the first quarter of last year.

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