For Google, a bad surprise leads to a good one

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It’s easier to hurdle the bar after they’ve taken it down a few notches.

That’s part of the story with Google Inc. today, which is Wall Street’s after-hours hero stock following the company’s first-quarter profit report. The shares are trading at $526, up 17% from their regular-session close of $449.54.

The company reported operating earnings (profit before accounting for stock-option-related costs) of $4.84 a share, well above analysts’ consensus forecast of $4.52.

But the consensus has come down from about $4.90 a share at the start of the year. Wall Street reduced its expectations after Google on Jan. 31 reported fourth-quarter operating profit of $4.43 a share, missing the consensus by 2 cents.

That miss hacked $48.40, or 8.6%, off the stock on Feb. 1, to $515.90. So investors who were in the shares on Jan. 31 still are under water, even at $526. Not to mention the folks who bought at the peak of about $741 in November.

Google’s fourth-quarter earnings miss was only the second time the company had come up short since it went public in 2004. The first miss was in results for the second quarter of last year.

Analysts’ current full-year earnings estimate for 2008 is $19.43 a share. At $526 the stock is priced at 27 times the consensus estimate. By contrast, at the November peak in the stock investors were paying about 48 times last year’s operating earnings.

So the price is cheaper. But is it cheap?