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Google Earnings: Stock Pops Late, Flat-Lines Next Day

Google has beaten estimates three out of four earnings periods, and its stock typically opens higher after it tops targets, but the bulk of its gains are made immediately following its report in after-hours trading, according to Birinyi Associates.

A sign is displayed outside of the Google headquarters in Mountain View, California.
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A sign is displayed outside of the Google headquarters in Mountain View, California.

Birinyi analyst Cleve Rueckert said since the first quarterly estimates were available for Google, back in July 2005, the company has beaten estimates 78 percent of the time and it opened higher the next day 71 percent of the time after a beat. It has finished the day higher 57 percent of the time. Google reports after Thursday's 4 p.m. closing bell.

If it beats, the average move higher in the after hours session is 3.5 percent. When it misses, the average decline is 6.8 percent, Rueckert said in an interview. That move is also typically made in the first few minutes of trading, after the report is released.

"If it beats, then at 9:30 tomorrow, when the market opens, Google will open up 3.5 percent and then it will stay there for the entire day. It won't do anything after that," he said. The average follow through move made post opening on the day after Google beats is a decline of 0.34 percent.

In October, for instance, Google beat estimates and rose 10.31 percent in the after hours session. The next day it was up just a further 0.79 percent.

Google stock is under pressure after trading higher earlier today, but its activity ahead of its earnings has not mattered much as far as the results go, Rueckert says.

"It's been down on average as much as 1 percent during the day, prior to beating the estimate, and then rallying on the earnings announcement. There's a lot of posturing in Google ahead of when they do announce. Options expiration is tomorrow, and it's a big options trader. It's been up and down all week. At the end of the day, it's probably going to be flat on the week," he said.

Google is expected to earn $8.09 per share, on revenues of $8.04 billion.

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