Premature earnings release causes Google stock price to nosedive

Earlier today, Google’s quarterly earnings were accidentally released via a filing with the Securities & Exchange Commission. The premature filing appears to have been made in error by R.R. Donnelley & Sons Co., which is the company retained by Google to print its financial documents. As if the snafu involving the filing of unofficial documents was not enough, the results showed that Google’s profit declined by 20% amid rising costs and declining advertising revenues. This missed expectations and triggered a sell-off with Google share prices down 9% before trading was suspended. Once trading resumed at about 3:20 pm ET, it remained in that area and was down 8% at last report.

All of the trading action occurred based on a preliminary report marked “PENDING LARRY QUOTE.” Clearly a reference to Google CEO Larry Page who had not yet provided his spin on the financial results. In official statements filed later in the afternoon, in newly added text, Page indicates, “We had a strong quarter. Revenue was up 45 percent year-on-year, and, at just fourteen years old, we cleared our first $14 billion revenue quarter.”

Details in the filing show the average cost of a Google “click” for advertisers fell 15% compared to a year ago and 3% compared to the second quarter. The good news is that paid clicks were up 33% from the prior year and 6% from the prior quarter. The falling fees for advertising are at least partially driven by the fact that mobile devices tend to pull in less clicks and revenue and with the growth of mobile devices relative to traditional desktops, Google is in a tough situation.

Overall, Google was profitable for the quarter, yielding $2.18 billion, though that was down from $2.73 billion a year earlier. Revenue came in at $11.33 billion excluding some costs, but missed analysts expectations of $11.86 billion. Likewise, with adjusted earnings at $9.03 per share, Google missed expectations of $10.65 a share and actually went down compared to earnings of $9.72 per share a year earlier.

Despite today’s slide and missing analysts’ expectations, Google has been performing quite well during 2012. They have achieved double digit revenue growth for over two years and the stock price rose considerably starting in July after concerns about the Motorola acquisition faded. Motorola did have a loss of $527 million for the quarter, but the drag is not as bad as previously anticipated. Google has announced a planned 20% reduction in Motorola’s workforce.

source: WSJ

About the Author: Jeff Causey

Raised in North Carolina, Jeff Causey is a licensed CPA in North Carolina. Jeff's past Android devices include an HTC EVO, a Samsung Note II, an LG G3, and a Motorola Moto X Pure Edition along with a Samsung Galaxy Tablet 10.1. He currently uses a Samsung Galaxy S8 and (very rarely) a Nexus 7 (2013). He is also using a Verizon-branded Motorola Moto Z Play Droid supplied by his job. Jeff used to have a pair of Google Glass and a Moto 360 Sport in his stable of gadgets. Unfortunately, his kids have all drunk the Apple Kool-Aid and have i-devices. Life at home often includes demonstrations of the superiority of his Android based devices. In his free time, Jeff is active an active runner usually training for his next marathon, owns a MINI Cooper, and plays Dungeons & Dragons. Jeff has three mostly grown kids and a golden retriever.