$Stock*Shop*Charts*News*Option$

[DiscoverGold]

Alphabet earnings: A $2.74 billion hit for Google, potential YouTube results for investors
By MarketWatch | July 22, 2017

Alphabet will realize EU fine, new rules could eventually force Google to disclose YouTube numbers

As it gears up for a second-quarter earnings report scheduled for Monday, Alphabet Inc. is already accounting for a $2.74 billion hit and may be preparing to reveal some long-awaited numbers.

The European Union’s antitrust regulator fined Alphabet GOOG, +0.49% GOOGL, +0.17% the record charge at the end of June after finding that Google promoted its own shopping service above others in its search results. Though the company is still considering an appeal of the ruling, it says it will recognize this charge in this quarter’s results.

The fine is not tax-deductible, so it will reduce Alphabet’s net income and earnings per share data by the full amount, the company says. Alphabet changed the way it reports earnings last quarter, focusing on GAAP earnings instead of non-GAAP results, which had factored out stock-based compensation.

The move to GAAP earnings arrived amid a larger push from the U.S. Securities and Exchange Commission to standardize earnings across companies and paint a better picture of a company’s true financial health. Alphabet will now move from that change to new revenue-recognition rules that could have more effects, including potentially forcing the company to finally break out its YouTube revenue.

In all of its prior earnings reports, Alphabet has combined YouTube’s results with Google search and other advertising. The new revenue-recognition rules—which take effect in January but are already being implemented by some early adopters like Microsoft Corp. MSFT, -0.58% —call on companies to report revenues the same way they are being reported to the chief decision maker at the company, said Tom Selling, publisher of The Accounting Onion. YouTube’s revenue is likely being reported to top executives, as it was singled out as an area “of extraordinary growth and opportunities” on Alphabet’s last earnings call.

“The disclosure of revenue components does not seem to reflect those key areas or the spirit of the new standard,” Selling said.

YouTube has been in a bright spotlight recently, as it launched a TV offering in April in five cities and has expanded into 10 more. It’s also trying to move past an advertising scandal, in which ads appeared alongside inappropriate content, sparking a promised revolt from advertisers.

What to expect

Earnings: Analysts surveyed by FactSet on average expect Alphabet to report earnings of $8.25 per share, compared with the $8.42 per share the company reported in the year-earlier period. The Estimize consensus, made up of estimates from sell-side and buy-side analysts as well as hedge-fund managers, academics and others, calls for earnings per share of $8.13.

As evidenced by MKM Partners, some analysts have already priced in the EU fine into their earnings forecast. MKM broke down the charge into a negative impact of $3.89 per share.

Alphabet beat earnings expectations last quarter, but missed fourth-quarter adjusted-earnings expectations after a large tax charge related to stock-based compensation. . .

http://www.marketwatch.com/story/alphabet-earnings-a-274-billion-hit-for-google-potential-youtube-results-for-investors-2017-07-21

• DiscoverGold