Why Trading in Google Vs. Microsoft and IBM May Soon Reverse
A closer examination of earnings results shows that trader action is backwards.
As it turns out my first suspicions ended up being true. Something was indeed strange in yesterday's Google (GOOG) EPS miss. But that doesn't make it hard to explain.
What most analysts are saying (and I confirmed), net of currency and a higher tax rate, the earnings are inline. This is notable even though revenue came in a bit light. The other factor I'm noting -- and I've only seen one mention of in the media -- is the impact from the interest income/expense line. Google actually posted a small loss here versus what could have been income of $260 million (give or take $15 million).
If this alone is factored, and I ignore taxes and currency, Google's EPS growth rate comes in very close to 20%, which was consensus. If all three are added, the EPS line grows by 30%. This also explains why operating and free cash generation was very similar to last quarter's very strong result.
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