Google Inc (NASDAQ:GOOGL) announced financial results for the quarter ended June 30, 2015.
“Our strong Q2 results reflect continued growth across the breadth of our products, most notably core search, where mobile stood out, as well as YouTube and programmatic advertising”, said Ruth Porat, CFO of Google. “We are focused every day on developing big new opportunities across a wide range of businesses. We will do so with great care regarding resource allocation.”
Q2 2015 Financial Highlights
The following summarizes our consolidated financial results for the quarters ended June 30, 2014 and 2015 (in millions, except for per share information; unaudited):
|Three Months Ended
June 30, 2014
|Three Months Ended
June 30, 2015
|Increase in revenues year over year||22||%||11||%|
|Traffic acquisition costs (TAC)||$||3,293||$||3,377|
|GAAP operating income||$||4,258||$||4,825|
|GAAP operating margin||27||%||27||%|
|Non-GAAP operating income||$||5,138||$||5,957|
|Non-GAAP operating margin||32||%||34||%|
|GAAP net income*||$||3,351||$||3,931|
|Non-GAAP net income||$||4,104||$||4,829|
|GAAP diluted EPS for Class A and B common stock*||$||4.88||$||4.93|
|GAAP diluted EPS for Class C capital stock*||$||4.88||$||6.43|
|Non-GAAP diluted EPS for Class A and B common stock and Class C capital stock||5.98||$||6.99|
|*GAAP net income and diluted EPS include Net Loss from Discontinued Operations for the three months ended June 30, 2014.|
Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense from continuing operations. Non-GAAP net income and non-GAAP diluted EPS exclude SBC expense from continuing operations, net of the related tax benefits, as well as the impact from Net Loss from Discontinued Operations. Non-GAAP diluted EPS also excludes the impact from the adjustment payment to Class C capital stockholders. These non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, and non-GAAP constant currency revenues and growth, are described and reconciled to the corresponding GAAP measures at the end of this release.
Adjustment Payment in Relation to Class C Capital Stock Distribution
In May 2015, we paid $522 million to the holders of Class C capital stock in the form of approximately 853 thousand shares of Class C capital stock and $47 million of cash in lieu of fractional shares of Class C capital stock, in accordance with the settlement of litigation involving the authorization to distribute Class C capital stock (the Adjustment Payment). The Adjustment Payment was allocated to the numerator for calculating net income per share of Class C capital stock from net income available to all stockholders and the remaining undistributed earnings were allocated on a pro rata basis to Class A and Class B common stock and Class C capital stock based on the number of shares used in the per share computation for each class of stock. The weighted-average share impact of the Adjustment Payment is included in the denominator of both basic and diluted net income per share computations for the three and six months ended June 30, 2015.
Q2 2015 Financial Summary
Revenues and Monetization
Revenues by source (in millions; unaudited):
|Three Months Ended
June 30, 2015
|Change from Q2 2014 to Q2 2015 (YoY)||Change from Q1 2015 to Q2 2015 (QoQ)|
|Google Network Members’ websites||3,621||2||%||1||%|
|Total advertising revenues*||16,023||11||%||3||%|
|*Advertising revenues are generally reported on a gross basis, consistent with GAAP, without deducting TAC.|
Had foreign exchange rates remained constant from the second quarter of 2014 through the second quarter of 2015, our revenues in the second quarter of 2015 would have been $1,103 million higher with a constant currency growth rate of 18% year over year. This includes a foreign exchange rate impact of $1,574 million, offset by hedging gains of $471 million related to our foreign exchange risk management program. Our constant currency revenues are presented in the financial tables following this release as well as in the accompanying materials on the Investor Relations website. (Original Source)
Following earnings results, Google shares are up 7.53% to $647.71 in after hours trading. GOOGL has a 1-year high of $608.91 and a 1-year low of $490.91. The stock’s 50-day moving average is $552.57 and its 200-day moving average is $546.21.
On the ratings front, Google has been the subject of a number of recent research reports. In a report released today, BMO analyst Daniel Salmon upgraded GOOGL to Buy, with a price target of $670, which represents a potential upside of 13.7% from where the stock is currently trading. Separately, yesterday, Deutsche Bank’s Ross Sandler maintained a Buy rating on the stock and has a price target of $670.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Daniel Salmon and Ross Sandler have a total average return of 11.7% and 9.6% respectively. Salmon has a success rate of 76.7% and is ranked #598 out of 3707 analysts, while Sandler has a success rate of 57.2% and is ranked #388.
Overall, 4 research analysts have assigned a Hold rating and 18 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $640.13 which is 8.6% above where the stock opened today.