Google Fans Target Keyword 'Upside'

For the record, analysts surveyed by Thomson First Call expect Google to report earnings per share for the fourth quarter ended Dec. 31 of 77 cents. That's up from the 70-cents headline number distilled from Google's third-quarter results, its first as a publicly traded company.

The First Call number excludes stock-based compensation, and the third-quarter number excluded as well the negative impact of settling litigation with rival Yahoo!.

On the top line, analysts expect net revenue of $591 million, up 17% from $503 million in the third quarter. As with the top-line number most commonly reported out of Yahoo!, that revenue figure excludes traffic acquisition costs, or the money that Google pays to other publishers for the privilege of running on their sites the advertisements it sells.

The mean of analysts' estimates for earnings before interest, taxes, depreciation and amortization amounts to $368 million, up from $321 million in the third quarter.

To sum up the mood among analysts, the confidence in Google's ability to show strong sequential growth is offset by fears of possible surprises the company may have in store regarding greater-than-expected investments in ventures such as Google Video.

American Technology Research's Mark Mahaney, for one, estimates that Yahoo!'s search revenue grew at an organic rate of 18% to 19% from the third to fourth quarters. With Google's larger international footprint, Mahaney estimates Google's search revenue will grow 20% or more. (Mahaney has a buy rating and a $210 price target on the stock.)

Particularly optimistic is RBC Capital Markets' Jordan Rohan, who expects Google's prior investments in international operations to pay off in the form of expanding EBITDA margins, not the contraction most expect. This growth could have taken place in the fourth quarter, writes Rohan, though it is equally possible it will happen in the first. (Rohan has a top pick rating on Google, and a Street-high price target of $235.)

But Benjamin Schachter of UBS warns investors to expect the unexpected. In a note published last week, he wrote that it wouldn't be surprising for Google to discuss new, significant investments in long-term businesses that could affect near-term numbers.

"In light of the market's reaction to eBay's miss and increased long-term investments," wrote Schachter, "we are admittedly gun-shy about how the Street would react to similar long-term investments from Google." (Schachter has a "reduce" rating and a $160 price target; his firm has done recent investment banking for Google.)

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