Google's Tax Shelter From the Storm
At Google, falling cash flow from operations may mask some growth concerns for the Web search giant and expose a poor-quality
that helped to push the company's shares beyond $800.
Google was able to beat earnings on April 18 because of an
unexpected 50%-plus drop in its tax rate
, which helped to bolster earnings by $1.22 a share, according to calculations by Sterne Agee analyst Shaw Wu.
Without the tax benefit, Google would have missed earnings by 33 cents, according to Wu's analysis.
On an earnings call
, Google Chief Financial Officer Patrick Pichette explained to mystified analysts that the firm's sharp drop in quarterly income tax was a result of recognizing federal research and development tax credits negotiated in Congress' so-called fiscal cliff deal.
In the first quarter, Google reported income tax expense of just $287 million on $3.35 billion in net income, reflecting an 8% rate. The Mountain View, Calif- based company reported earnings of $11.58 a share, beating consensus expectations of $10.66, according to
While Google's tax rate helped to drive about 80% of Google's earnings-per-share growth from the first quarter of 2012, the company's cash flow fell slightly to about $3.5 billion.
issues on Google's tax rate as "noise" and took the earnings report as a beat.
To be seen, however, is whether falling cash flow provides an early glimpse of slowing profits at the Web search titan.