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What's in the Offing for Alphabet's (GOOGL) Q1 Earnings?

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Alphabet Inc. (GOOGL - Free Report) is scheduled to report first-quarter 2020 results on Apr 28. In the last reported quarter, it delivered a positive earnings surprise of 20.3%.

The stock outperformed the Zacks Consensus Estimate in three out of the trailing four quarters, with the average positive earnings surprise being 9.3%.

For the first quarter, the Zacks Consensus Estimate for earnings is pegged at $11.16 per share, implying a decline of 6.2% from the year-ago reported figure.

The consensus mark for revenues is pegged at $33.27 billion, implying growth of 12.9% from the year-ago reported figure.

Alphabet Inc. Price and EPS Surprise

 

Performance in the Last Reported Quarter

Alphabet reported fourth-quarter 2019 non-GAAP earnings of $15.35 per share, which surpassed the Zacks Consensus Estimate of $12.76. Also, earnings increased 51.7% sequentially and 20.2% year over year.

However, revenues of $37.57 billion missed the Zacks Consensus Estimate by 2.3% due to reduction in search advertising growth and lower-than-expected YouTube sales.

Let’s see how things have shaped up for this announcement.

Search, Cloud Momentum & Others - Key Catalysts

Alphabet’s dominant position in the search world is anticipated to have been a key catalyst for top-line growth.

The company’s continued focus on innovation of the search segment, which accounts for a major portion of total revenues, is expected to have enhanced the segment’s earnings and driven traffic on its platform.

In an attempt to check the spread of coronavirus, Alphabet took a number of initiatives in the first quarter, which might have expanded top-line growth. Its search division, Google has been striving to provide coronavirus-related information hub, which will comprise symptoms, risk factors and testing, among others.

Also, Alphabet’s health-care division called Verily launched a COVID-19 screening and testing website under Project Baseline in the first quarter. This particular site has been offering screening and potential free testing of coronavirus.

Google has been significantly gaining momentum in the highly-competitive cloud market over the last few quarters. During the first quarter, it expanded the cloud service portfolio and data centers.

In this regard, during the quarter, Google Cloud joined forces with AT&T to integrate the latter’s 5G network into its cloud offerings.

The positive impact of these efforts is likely to reflect on the upcoming results.

Concerns

Alphabet’s search advertising business has been facing stiff competition from Amazon. Google Cloud trails both Amazon and Microsoft (MSFT) in the cloud computing space. Increasing competition in both the markets might have hurt its top-line growth in the to-be-reported quarter.

In addition, increased spending on consumer gadgets, YouTube video app and cloud computing services is anticipated to have been a risk. Higher expenses are expected to get reflected on the company’s upcoming results.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Alphabet this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that is not the case here.

Earnings ESP: The company has an Earnings ESP of -3.85%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Alphabethas a Zacks Rank #3.

Stocks That Warrant a Look

You may consider the following stocks that have the right combination of elements to beat on earnings in the upcoming releases.

Pixelworks, Inc. (PXLW - Free Report) has an Earnings ESP of +5.26% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Baidu, Inc. (BIDU - Free Report) has an Earnings ESP of +10.09% and a Zacks Rank of 2.

Etsy, Inc. (ETSY - Free Report) has an Earnings ESP of +8.17% and a Zacks Rank #2.

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