The Third Pig

Google Comes Through In The Clutch

http://www.brickfinancial.com/thethirdpig/archive/2008/04/google_comes_through_in_the_cl.html

Posted by Ben Taylor on April 17, 2008 09:59 PM

GoogleGoogle (GOOG) surprised the street today as first-quarter 2008 profit grew year over year and its revenue growth topped 42%. The “newsworthy” numbers break down like this:

  • For the quarter, net income grew to $1.31 billion from $1 billion one year ago
  • Earnings per share grew to $4.84, representing a growth rate of 52%
  • Google earnings beat wall street expectations by $0.32 per share

Google CEO credits the adjustments and innovation in the company’s search, ads and applications with the company’s healthy growth globally. This performance alleviated some of the economic worries battering its stock this year. Even with the after-hours surge in the stock price of 17% (up to $526) or so, the shares are still down 24% (from $691.5) year to date.
Of course, the above mentioned figures are fine.

But what interests me more is if Google is translating its earnings growth in into real spendable cash. According to its press release Google sports cash on its balance sheet north of $12 billion dollars. A lot of coin but down from last quarter’s $14 billion. Interesting. Not quite Berkshire Hathaway cash levels but Google’s success may put the company in a position where finding adequate investments for its money become harder to find.

A further perusal of the press release shows Google’s free cash flow for the quarter at $938 million. This represents 51% growth year over in cash flow. Free cash flow for the trailing 12 months topped $3.8 billion. Now that’s a tasty figure. With no real debt to speak of Google looks primed for more growth. Those of us who were patient enough to wait for Google share price to slip, as it has for most of 2008, should be in a fine position to enjoy Google upturn. That is if they can continue to execute.

On the conference call Google assured investors that its business wasn't hampered by the economic slowdown and Schmidt, the company’s CEO remained confident they are “well-positioned for 2008 and beyond”. I think this is a fair statement given that Google receives a cool 51% of its revenues from outside the U.S. One of the advantages of a global business in a global economy.

Disclosure: I and the clients of Brick Financial Management, LLC owned shares of Google at the time of this writing.

Posted by Ben Taylor on April 17, 2008 09:59 PM

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