Credit: Shutterstock photoThere are very few companies in the entire world with a legacy that is even remotely comparable to Google. This technology behemoth, which now operates under the Alphabet Inc. GOOGL banner, revolutionized the internet-so much so that "Googling" is verb used in every-day vernacular-and that's why it's even more exciting that Alphabet is now a Zacks Rank #1 (Strong Buy) stock.
Latest Earnings Performance
Just a few weeks ago, Alphabet posted earnings of $7.73 per share, beating our Zacks Consensus Estimate of $7.48 per share. The company saw revenue figures of $24.506 billion, and taking out commissions of $4.008 billion paid to Google Network Members, Alphabet posted revenues of $20.12-beating our consensus estimate of $19.650 billion.
Operating income of $6.57 billion and operating margin of 27% were both up year-over-year, and aggregate paid clicks gained 44%. Aggregate cost-per-clicks came in at a loss of 19% for the quarter. Alphabet refined its methodology for paid clicks and cost-per-click "to include additional categories of TrueView engagement ads and exclude non-engagement based trial ad formats, resulting in a modest increase in paid clicks and a modest decrease in cost-per-click."
Google isn't known for its impressive earnings surprise history, but the company has started outperforming more consistently since the transition to the Alphabet Inc. structure in 2015. Just prior to that change, Google hired Ruth Porat, a former Morgan Stanley exec, as its CFO. So far, it seems Porat has delivered on her promise to make Alphabet a more efficient company.
Dominating the Future
Perhaps more important than Alphabet's recent earnings performance is its leadership in several key emerging tech markets. The biggest challenge for the company has been shifting away from its reliance on search-based revenue, but now it looks like Alphabet is poised to dominate in our evolving world.
With the rollout of its new line of hardware, which includes the Pixel phone and Home automation device, Alphabet ushered in the next generation of device-to-software interaction through its compatible Google Assistant program. The AI-powered personal assistant puts Google at the forefront of the Internet of Things race (also read: How to Invest in the "Internet of Things" ).
Alphabet is also poised to break through in the self-driving car market, and its YouTube subsidiary has been ramping up its original programming efforts lately. Furthermore, the Google Cloud Platform is a viable cloud computing player, and the aforementioned hardware devices have been critically well-received.
Estimate Revision Activity
While all of these things are impressive, it's really a stock's earnings estimate revision activity that influences its Zacks Rank. In this regard, Alphabet is also blowing away the competition. Within the past month, we have seen eight positive revisions for the company's current-quarter and next-quarter earnings, sending the respective Zacks Consensus Estimates 39 cents and 20 cents higher over that timeframe. We have also seen nine positive revisions to Alphabet's full-year and next-year earnings.
With everything in mind, it's clear to see why Alphabet is still a solid choice for investors right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
