Legal hassles continue for Alphabet Inc.’s GOOGL Google as it faces a lawsuit from the U.S. Department of Labor. It has been alleged of not revealing employee pay information that the department seeks regularly for compliance evaluation.
For the last one year, the stock has outperformed the Zacks Internet-Services industry. It has returned 6.07% compared with the industry’s return of 4.88%.
The Allegation
Google being a federal contractor with over $10,000 in business is required to abide by rules against racial or religious discrimination and cooperate with government audit of its equal opportunity program.
However, the Office of Federal Contract Compliance Programs (OFCCP) has charged the company of denying submission of compensation data since Sep 2015.
Google’s Defense
Google has cited information safety as the reason behind withholding the data. A Google spokesman stated that the company has provided a lot of records over the last one year but some of the requests, if entertained, will interfere with employee privacy.
ALPHABET INC-A EPS Diluted (TTM)
Our Take
If Google continues to mess with the government over compensation data, it may end up getting its current federal contracts cancelled and debarred from entering future contracts. Apart from a drain on revenues, it will earn the company a bad name on privacy concerns.
The good news is that the company has had extraordinary success in the courtroom and with government officials around the world. However, its streak of “good luck” can change at any time and so investors remain wary.
Zacks Rank and Stocks to Consider
Currently, Alphabet is a Zacks Rank #3 (Hold) stock. Better-ranked stocks in the broader technology sector include Daktronics Inc. DAKT, NVIDIA Corporation NVDA and Control4 Corporation CTRL, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
For the current year, the consensus estimate for Daktronics has gone up by 45.5% in the past 60 days. Estimates for NVIDIA and Control4 have gone up by 30.6% and 2.3%, respectively over the same time frame.
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