Google Misses But Cites Progress

As many analysts and investors had begun to speculate over the course of Google’s (GOOG: 494.02 0.00 0.00%) 2nd quarter 2010, the Internet giant missed estimates, posting EPS of $5.71 per share (Zacks accounts for stock-based compensation) on revenues of $6.82 billion in the quarter. The Zacks Consensus Estimate was $5.78 per share.

Google CEO Eric Schmidt was quick to point toward the company’s 24% revenue growth year over year, and stated that the company plans “to continue to invest aggressively in our core areas of strategic focus.” Leading up to the earnings announcement after the bell, GOOG shares crosses into positive territory and finished up 0.55% at $494.02. Immediately after the earnings miss, shares have dropped over 3.5%, giving back the total of its gains for the week.

The second quarter of 2010 was not Google’s finest hour. Aside from the high-profile failure of its online Nexus One store in May — which caused a significant number of analysts to pull back on EPS estimates for both the quarter and fiscal 2010 and brought the Zacks consensus from $5.81 to $5.73 and $24.94 to $24.48, respectively — a strengthening U.S. dollar in the quarter has hit Google’s significant overseas revenues. More than half of Google’s total revenue came from outside the U.S. Elsewhere, although Google’s relationship with China seems to be on the mend, there are still plenty of questions and concerns in that ongoing story.

The company generated $2.1 billion in cash flows from operations, up from $1.6 billion in the year-earlier quarter. With capital expenditures of $476 million during  the quarter, primarily on IT infrastructure investments, Google generated free cash flows of $1.6 billion. At the end of the quarter, the company had $30.1 billion in cash on hand.

Analysts' Recommendation:	Strong Buy
30 Days Ago:	Strong Buy
Analysts' Target:	$643

Analysts' Targets
Stifel Nicolaus	$675
Sell
Wednesday, July 14, 2010
Deutsche Bank Securities	$655
Buy
Tuesday, July 13, 2010
Kaufman Brothers	$640
Buy
Friday, July 09, 2010
RBC Capital Markets	$600
Outperform
Friday, July 09, 2010
Caris & Company	$560
Above Average
Monday, June 14, 2010
MKM Partners LLC	$600
Neutral
Friday, May 21, 2010
Oppenheimer & Co. Inc.	$715
Buy
Friday, March 12, 2010
Thomas Weisel	$690
Thursday, January 28, 2010
Collins Stewart LLC	$615
Hold
Friday, January 22, 2010
Barclays Capital	$675
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