Why Earnings Just Don’t Make Sense (Part 2)

Last time, I presented three reports on Google’s 2013 Q4 earnings announcement. Today I will discuss them.

First question: was this a good or bad earnings report?

Headline for Report #1: “Google misses, shares up.” That sounds like a bad report but a good outcome. On the other hand, if shares are up then maybe it’s a good report. “Misses” has a negative connotation though.

Right out of the gate, I’m confused.

Report #2 says “Google earnings top expectations.” This seems contradictory to Report #1, which said Google “missed.” Topping expectations is more consistent with the stock moving higher but then is Report #1 wrong about the miss? Maybe the judgment call refers to different measures (e.g. revenue, earnings, margins). Is the writing sloppy because the antecedent was not specified? Report #2 later clarifies by saying “Google’s earnings figures were pretty hot,” which tells us that earnings, at least, were good.

Report #3 says “strong revenue growth,” which suggests that revenue was good. Earnings and revenue were good, then, so what “missed” according to Report #1? Actually, Report #3 says revenue growth was strong but it says nothing about estimates. Maybe Google still missed its revenue estimates despite revenue being strong?

Report #3 goes on to say: “the search giant missed earnings expectations by a wide margin but wasn’t punished by traders.” Report #2 said earnings topped expectations. Which is it: did they top or did they miss by a wide margin? There’s no fuzziness with this comparison: they are in stark contrast with one another!

I will take a closer look at the numbers in the next post.