Alphabet (GOOGL) Earnings Expected to Grow: Should You Buy?

Wall Street anticipates Alphabet (GOOGL) will see a year-over-year increase in earnings due to higher revenues, as it prepares to release its quarterly results for the period ending September 2024. This consensus outlook provides insight into the company’s earnings performance, but the actual results compared to these forecasts will play a significant role in determining the company's near-term stock price movements.

If the upcoming earnings report, scheduled for October 29, shows results exceeding these key estimates, there is a chance that the stock price may rise. Conversely, if the results fall short, the stock might experience a decline.

Management's commentary on business conditions during the earnings call will be crucial in determining how long any immediate price changes might last and how they might influence future earnings expectations. Therefore, understanding the odds of a positive surprise in earnings is important.

Zacks Consensus Estimate

Alphabet is projected to report earnings of $1.83 per share, which reflects an impressive year-over-year growth of 18.1%. Additionally, revenues are forecasted to reach $72.78 billion, representing a 13.6% increase compared to the same quarter last year.

Estimate Revisions Trend

Over the past 30 days, the consensus EPS estimate has remained steady, indicating that analysts covering Alphabet have not significantly altered their expectations during this period. It’s important to remember that the direction of revisions may not always correspond with the overall consensus changes.

Earnings Whisper

In the lead-up to earnings releases, revisions to estimates can provide insights into the business situation for the upcoming results. The Zacks Earnings ESP (Expected Surprise Prediction) utilizes this information, comparing the Most Accurate Estimate with the Zacks Consensus Estimate. This approach suggests that analysts who adjust their estimates just before earnings may possess the latest and most accurate information.

A positive Earnings ESP indicates potential for better-than-expected results, especially when paired with a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold). Historically, stocks in this category experience positive surprises nearly 70% of the time. However, a negative Earnings ESP does not necessarily point to an earnings miss.

How Have the Numbers Shaped Up for Alphabet?

For Alphabet, the Most Accurate Estimate stands above the Zacks Consensus Estimate, indicating a recent bullish outlook among analysts regarding the company’s earnings potential, leading to an Earnings ESP of +1.57%. Currently, Alphabet has a Zacks Rank of #3.

This combination suggests strong potential for Alphabet to surpass the consensus EPS estimate in its upcoming report.

Does Earnings Surprise History Hold Any Clue?

When estimating future earnings, analysts often consider a company’s track record in meeting past expectations. In Alphabet's case, it recently surpassed previous earnings estimates, reporting $1.89 per share when $1.85 was anticipated, representing a surprise of +2.16%. Over the last four quarters, the company has successfully beat consensus EPS estimates consistently.

Bottom Line

While the outcome of an earnings report can certainly influence a stock’s direction, it is not the only factor at play. Stocks can decline even when they beat earnings estimates due to other disappointing elements, while unforeseen positive events might elevate stocks that miss expectations.

That said, focusing on companies poised for earnings beats can enhance investment success probabilities. Therefore, it's wise to consider a company’s Earnings ESP and Zacks Rank just before their quarterly reports. Using tools like the Earnings ESP Filter can help investors identify promising stocks.

As it stands, Alphabet seems to be a strong candidate for an earnings beat. However, investors should consider other factors carefully before making any investment decisions leading up to its earnings announcement.

Stay informed about upcoming earnings by checking the Earnings Calendar.

Alphabet, Earnings, Investing