Google is Primed for Strong Q4 Earnings: Here's What to Expect

Alphabet Inc GOOGL Information Technology - Internet, Software & Services | Reports February 1, After Market Closes

Key Takeaways

• The Estimize consensus is calling for EPS of $8.17 and revenue of $16.892 billion, roughly in-line with Wall Street's estimates
• The reorganization to Alphabet will provide investors transparency and accountability for the company's investments
• Alphabet is on the verge of passing Apple as the most valuable company in terms of market cap
• What are you expecting for GOOGL? Get your estimate in here!

Alphabet (GOOGL), the Google holding company, is scheduled to report fourth quarter earnings February 1, after the market closes. Alphabet completed an operational restructure to better improve accountability and transparency between its core business, Google, and its moonshot investments. Google will continue on as the company's legacy business and include properties such as search and advertising, while Alphabet contains higher growth initiatives such as self-driving cars, health care, Google-X and  smart homes, among other things. This will be the first quarter that investors get a peek into how those both of those segments have performed since 2013.The reorganization and new cost cutting initiatives helped Alphabet shares increase 46% in 2015. With another favorable quarter, Alphabet is on the verge of eclipsing Apple as the most valuable company in terms of market capitalization. Alphabet's focus on innovation and growing its already dominant search division has contributed to the recent string of robust growth. Thanks to growing mobile initiatives, the introduction of YouTube Red, continued acquisitions and the aforementioned reorg, Alphabet is poised to beat expectations yet again. This quarter, the Estimize consensus is calling for EPS of $8.17 and revenue of $16.892 billion. These expectations have been rising into the report, and revenue estimates have just eclipsed the Street's consensus by $26M, with the Select Consensus (weighted more heavily for historically accurate analysts and more recent estimates) is even more bullish, expecting a $31M beat on the top-line. Compared to Q4 2014, this reflects a projected YoY increase in EPS and revenue of 19% and 17%, this would be the highest revenue growth rate for GOOGL in over 2 years.  Alphabet appears to be firing on all cylinders and this upcoming earnings report should be no different. Even under the umbrella company, Google remains the key cog in the economic engine that is now Alphabet. The company's AdWord and AdSense programs generate a majority of Alphabet's revenue with other business ventures making up the rest. Although desktop was the most popular platform, mobile search is slowly catching up as Alphabet grows out its mobile initiatives. This includes improving Android products which help build mobile search but also drive app purchases in Google Play. In mobile and video consumption, YouTube continues to perform well and is prepared to launch its first subscription based service in the near future. YouTube Red should give a nice boost to the video platform's bottom line which relies heavily on mobile and desktop advertising. It is unclear how Alphabet's other investments such as Calico, Nest and others will perform. In the past, Googles moonshot projects lost the company billions as they grew to profitability. Now under Alphabet, the company should be able to defer losses and appease investors. On the downside, Alphabet still faces downward pressure on margins from currency headwinds and regulatory scrutiny all over the world. Still, Alphabet has the financial resources and long term initiatives that it will follow Facebook's lead, rather than Amazon, when it reports this Monday.

Do you think GOOGL can beat estimates? There is still time to get your estimate in here!

Photo Credit: Vince Smith