Google Expects Solid Q2 Amid China, Europe Concerns
Google is sure to face questions about its business abroad and snafus in the United States, such as the failure of its Nexus One smartphone to catch on in the market, when it announces second-quarter earnings July 15.
The company will hold a call to discuss Q2 earnings July 15 after the market close. Analysts polled by Thomson Reuters expect Google to report earnings of $6.54 per share on sales of $5 billion.
That's significantly higher than the $4.66 per share on revenue of $5.52 billion the company baked in the second quarter of 2009, with the online advertising sector recovering from the recession.
Some analysts will argue the market is still recovering, but most agree Google's core business remains strong.
This appears true even in the face of competitive threats such as Apple, Microsoft's Bing and Facebook, as well as troubles in China, antitrust concerns in Europe and hiccups on the home front.
The European Commission antitrust authority is currently looking into allegations of anti-competitive conduct in search versus Google from search startups such as Foundem and Microsoft's Ciao from Bing.
Google has been at odds with China since a cyber-attack originating from that country induced Google to stop censoring search and port users to Google.hk.
China did not like Google's bid to obviate its laws, and there were thoughts the country would not renew the search engine's license to conduct business there. China renewed the license, but tensions between Google and the country remain high.
FBR Capital Markets expects Google to report $5 billion in revenues and an earnings per share of $6.55. The research firm said July 13 Google's stock has been pressured by the China rift and a "seemingly endless wave of less tangible big picture concerns."
This includes Google's worsening relationship with Apple, privacy issues and regulatory concerns. However, the license renewal in China and a victory over Viacom regarding its YouTube property may shift sentiment.
Jefferies and Co. analyst Youssef Squali expects net revenues and net earnings per share of $4.86 billion and $6.41, respectively. Squali said his channel checks suggest that marketers' appetite for search advertising, Google's bread and butter, remains strong.
Citing comScore's latest search metrics, which put Google at 66 percent market share in the United States, he said Google's U.S. search volume grew by 9.2 percent year-over-year in the second quarter.
Of course, there could be some fluctuations in the numbers. Squali said he anticipates some top-line risk in consensus numbers as the Street has yet to fully gauge FX headwinds and revenue loss from the Nexus One.
Google launched its Nexus One smartphone in January, selling it exclusively from its Webstore for $179 with a T-Mobile contract or unlocked for $529. Consumers shied away from buying a handset without playing with it, and Google shuttered the store May 14.
The failure proved a blow to the company's plans to bring the phone retail sector into the land of e-commerce. Analysts on the earnings call Thursday may hammer Google on how much it made and lost from the Nexus One.