Why Earnings Just Don’t Make Sense (Part 3)

Last time, I began to discuss three reports on Google’s 2013 Q4 earnings announcement and ended up somewhat confused. Today I will focus closer on the numbers to see if we can gain some clarity.

Report #1 said Google made $9.93 in Q4, which missed the consensus estimate by $0.41. This implies the consensus estimate to be $10.34. Report #3 said they made $12.01, which missed the consensus estimate of $12.26. The two reports are inconsistent with regard to the consensus estimate. I’m not sure how that can be since I understand “consensus” to be the average of all published analyst estimates. What’s worse, though, is that the two reports don’t agree on Google’s actual earnings! Maybe one reporter was sick or had excessive wax build-up preventing him/her from hearing on that day?

Once again, I am confused.

I suspect Report #3 is poorly written. The last sentence says “last quarter, Google… earned $10.47.” As mentioned above, Report #3 said they made $12.01: in the same paragraph! Did they just state two different earnings numbers just three sentences apart?! That can’t be. I must be misunderstanding. I can only surmise that “last quarter” means 2013 Q3 while the current report covers 2013 Q4. In other words, “last quarter” is Q3 and “this quarter” would be Q4.

Focusing on the revenue numbers provides a bit more clarity. Reports #1 and #3 say Google posted revenue of $16.86 billion. Report #2 says revenue was $16.9 billion, which is equal to the others taken to one decimal place. Finally we get some consistency! Report #2 does say that revenue was for “last quarter,” though. Evidently for Report #2, “last quarter” is 2013 Q4 and maybe 2013 Q3 would have been “the quarter before last.” This is different syntax than applied in Report #3 where “last quarter” referred to 2013 Q3 as discussed above.

Deep breaths…

I will continue in the next post.