Market Insider

Google's Earnings Miss and GE Report Keep Early Focus on Earnings Friday


Google’s big earnings miss could hang over the market Friday, even as investors turn their attention to multinational General Electric and focus on some of the brighter spots in tech.

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At first blush, the older line tech names — Intel , IBM , and Microsoft — all beat street estimates in afternoon earnings reports Thursday, and their shares all edged higher in late trading. Internet giant Google, on the other hand, lost more than 9 percent, one of the worst post-earnings declines for its stock in its six-year history as a public company.

Google earnings rose 6 percent to $2.71 billion or $8.22 per share in the fourth quarter. Excluding items, Google earned $9.50 per share, missing the consensus estimate of $10.49 per share.

“That’s going to leave a mark. But we had IBM. That was good. Intel was good, and Microsoft was good. But the QQQs are down. That could indicate the Nasdaq 100 would be down tomorrow,” said Steve Massocca of Wedbush Securities. IBM profits rose by 4.4 percent and it provided strong guidance for 2012 though it said revenues were slightly lower than expected because of currency impact.

Microsoft’s fiscal second quarter profit was slightly lower at $6.62 billion from $6.63 billion last year, but its smaller float helped lift its earnings per share to $0.78, better than analysts’ estimates of $0.76 per share.

Focus Friday will be on General Electric , part owner of CNBC parent, NBC Universal. GE is expected to earn $0.38 per share on revenues of $40.2 billion.

General Electric, because of its diverse business mix and international positioning, will be an important read on the quarter.

“The stock has been leading the market off that November low. It’s been relatively strong, especially for one that’s considered a true multinational company. To do well in this environment is very important. How it’s (stock is) acting, and how it’s been acting, to me, is as a real market leader,” said Marc Pado, Cantor Fitzgerald strategist. “If they can get a good number and follow through on that, I think it’s a very positive catalyst for the market.”

Pado said he is watching the comment from GE as well as what it says about the impact from the rising dollar.

As of late Wednesday, 10 percent of the S&P 500 companies reported. According to Thomson Reuters I/B/E/S, 52.9 percent beat expectations, and 27.5 percent missed expectations.  The firm notes that in a typical quarter, since 1994, 62 percent of companies beat estimates and during the recovery 70 percent have beaten estimates.

Pado said overall earnings are looking pretty good, and he expects investors to take another look at Google after its bruising. “Nobody was expecting anything great this quarter. We don’t need blowout earnings to be successful. We just need good solid balance sheets,” he said.

Stocks were higher Thursday after better-than-expected jobless claims of 352,000 and a good enough earnings report from Bank of America . The Dow was up 45 at 12,623, and the S&P 500 gained 6 to 1314. Nasdaq was the best performer,  up 18 points at 2788.

Since the start of January, the Dow is up 3.3 percent, the S&P is up 4.5 percent and the Nasdaq is up 7 percent.

Massocca said it would not be surprising to see the market take a breather. “I don’t think it’s going to take much of an excuse to get the market going down,” he said, noting the risk from Europe remains.

Ongoing talks between Greece and its private lenders will be important for markets Friday, as they work toward a debt restructuring deal. The market is optimistic for  a resolution by this weekend. The euro edged above 1.29 Thursday.

The focus Friday will also be on Italy’s new technocrat leader, Prime Minister Mario Monti, as he introduces measures aimed at making the country’s economy more competitive. Those measures include more taxi licenses and expanded times for retailers to hold sales, according to the Wall Street Journal. 

Besides earnings news, U.S. markets are watching the release of December existing home sales at 10 a.m.

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