Google expected to post strong earnings

SAN FRANCISCO (MarketWatch) � Google Inc. is expected to post a 20% gain in earnings on even stronger revenue growth when the Internet search giant reports fourth-quarter results Thursday.

Reuters Google is expected to post strong fourth-quarter earnings and sales � with a growing expense line.

Analysts believe Google�s GOOG �core search business has continued to perform well during the period, despite a weak global economy, particularly in Europe. Improvements in its display-ad and mobile businesses are also expected to boost the top line, though several analysts are also predicting a growing expense line as the company continues to hire and expand.

Google is slated to report its results on after Thursday�s closing bell. Wall Street�s consensus calls for earnings of $10.50 per share on net revenue of $8.37 billion, according to consensus estimates from FactSet Research.

In last year�s fourth quarter, Google reported earnings of $8.75 per share on net revenue of $6.37 billion.

The results will come at a volatile time for the company�s stock. Google�s shares topped the $670 mark early this year, their highest level in four years, through the stock has slipped by about 6% since then.

/quotes/zigman/93888/quotes/nls/goog GOOG 632.86, +0.56, +0.09% Three years of Google

�New management is more focused on product innovation and is improving speed within the company,� Doug Anmuth of J.P. Morgan wrote in a note to clients on Friday. �We think investor sentiment is overly focused on Motorola Mobility, and the core business continues to operate very well.�

Anmuth was referring to Google�s pending $12.5 billion acquisition of wireless-device maker Motorola Mobility , which is awaiting regulatory approval.

On Jan. 6, Motorola preannounced lower-than-expected smartphone sales for the fourth quarter. At the Consumer Electronics Show in Las Vegas last week, Motorola CEO Sanjay Jha said part of the shortfall stemmed from the high price of the company�s most recent launch, the Razr 3. Read CES blog posting on Motorola meeting.

Motorola�s results will not be included in Google�s numbers for the period, and the company does not issue quarterly forecasts. Anmuth is bullish on the company�s search business, predicting that paid clicks will grow by 26% compared with the year-ago quarter. He added that the cost-per-click, or CPC, metric �may be negatively impacted due to [foreign exchange] headwinds, particularly around weakness in the euro.�

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Ben Schachter of Macquarie wrote Tuesday that he expects the company�s revenue line to �benefit from solid search trends, strength from mobile (incremental search volume and Android share gains), better-than-expected emerging-markets growth and demand for display products.�

Another area that will be closely watched is the company�s expense line � particularly as it relates to marketing and hiring.

Colin Sebastian of Robert W. Baird expects the company to close out the year with pro forma operating expenses totaling about 39% of revenue, compared with 35% in 2010, he said. The company has been pushing new initiatives such as its Google+ social network and its Chrome Internet browser and operating system.

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�While Google does not face the same downward margin pressure that impact pure-play online retailers such as Amazon AMZN , we note that marketing expenses are a wild card given heavy advertising for Chrome and Google+,� Sebastian wrote in a report.

Google�s been on a heavy pace of hiring of late. The company�s head count jumped by 28% to 31,353 employees in the first nine months of 2011.

This de-leveraging and operating-expenses spending �by themselves are bad things, but what will be key is the return that Google is able to generate over time from these expenses [or] investments,� Mark Mahaney of Citigroup wrote in a note Friday.

The quarterly report will also mark a year since Google announced that co-founder Larry Page was taking over the CEO role from Eric Schmidt, who assumed the post of executive chairman.