Google Inc (NASDAQ:GOOG)‘s shares are down close to 9% after the tech giant mistakenly released its third quarter earnings around lunchtime. The company missed the Street’s estimates quite significantly, as analysts were expecting it to reach EPS of $10.65 a share; Google Inc (NASDAQ:GOOG) reached just $9.03 a share. The miss of more than 15% comes after Google Inc (NASDAQ:GOOG) beat earnings estimates in Q1 and Q2 by an average margin of 2.3%.
The company, which has been in patent litigation with Vringo, Inc. (NYSEAMEX:VRNG) this week, realized a big loss from Motorola Mobility, which was acquired earlier this year. The segment generated an adjusted loss of over $151 million for Google Inc (NASDAQ:GOOG).
Due to the miss, Google’s Q3 EPS is down more than 7% year-over-year. The company’s stock currently trades at a modest PEG of 1.33 and a trailing P/E of 22.4X. Google’s five-year historical average earnings multiple is nearly 25% higher at 30.0X, and the Internet content and information industry’s average P/E is just over 28.0X. Check out our comprehensive database to see which hedge funds are holding Google Inc (NASDAQ:GOOG).
In light of the Google Inc (NASDAQ:GOOG) fallout, Motorola Solutions Inc (NYSE:MSI) is down slightly on the day. Motorola Solutions trades at a PEG ratio of 1.52, and analysts earnings growth of 16.3% a year over the next half-decade. This valuation is above Cisco (1.45), but below peers like Harris Corp. (3.01) and Trimble Navigation Limited (1.57). The company sports a trailing P/E of 24.8X, which is sightly above the communication equipment industry’s average. Motorola is expected to report its own Q3 earnings on October 24th, where analysts are forecasting EPS of 73 cents a share, which would mark a 12.3% increase YOY.
Other related companies that are trading down this afternoon are Yelp Inc (NYSE:YELP) and AOL, Inc. (NYSE:AOL), which have lost 1.73% and 3.00% on the day. It is estimated that over 75% over Yelp’s traffic comes from Google Inc (NASDAQ:GOOG) Search, but another explanation for the Yelp decline on the day could be its decision to release earnings on November 1st. The company is trading at P/S (14.7X) and P/B (11.2X) multiples nearly three times that of its industry’s averages.
AOL, meanwhile, has had a decent week, and hit a 52-week high of $37.94 earlier this week before settling back down into the $36 range. The company is currently in the third year of a five-year deal in which Google Inc (NASDAQ:GOOG) provides the search results for its websites. AOL has nearly doubled its earnings this year, and analysts expect the company to grow its bottom line by 20% a year over the next half-decade. Despite this bullish forecast, AOL currently trades at a ridiculously low PEG ratio of 0.18; typically any figure below 1.0 signals undervaluation.
Microsoft Corporation (NASDSAQ:MSFT) also reported its earnings after the bell (Q1 FY 2013). On the whole, the release was a disappointment, though the company’s issues are not related to those of Google Inc (NASDAQ:GOOG). Microsoft reported EPS of 53 cents a share, which is a 22.1% decline year over year, and a miss of 5.4% from consensus estimates. The miss marked the end of a three-quarter streak of positive surprises, which pulled Microsoft to a FY 2012 EPS of $2.78, slightly above full year estimates.
By the end of this year, analysts are forecasting Microsoft to reach a bottom line of $3.01 and despite the Q1 miss, a successful launch of the Windows 8 OS can cure the company’s ills. Like Google Inc (NASDAQ:GOOG), Microsoft trades at generally attractive valuation metrics, and sports P/B and P/S ratios 15-30% below industry averages. Here’s a look at the hedge fund industry’s sentiment surrounding the company.
