Amazon.com, Inc., Baidu Inc: Q2 Earnings Preview

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Amazon.com, Inc., Baidu Inc: Q2 Earnings Preview
By Szk7788 (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

U.S. e-commerce juggernaut Amazon.com, Inc. (NASDAQ:AMZN) and Chinese search engine giant Baidu Inc (ADR) (NASDAQ:BIDU) are scheduled to report their second-quarter results on Thursday, July 24 after the market closes. Both companies have seen their revenues grow leaps and bounds for the past several years. Baidu is profitable, but Amazon is expected to remain in red in the June quarter. Let’s check out what analysts expect from Q2 results of Amazon and Baidu.

Amazon: strong revenue growth

Analysts polled by Thomson Reuters expect the online retailer to report $19.34 billion in revenues, up 23.20% from $15.70 billion in the same quarter last year. However, Amazon’s quarterly losses are expected to widen from 2 cents last year to 15 cents in the latest quarter. The results will also show the impact of the Fire set-top box launched on April 2, and the recently launched Fire Phone on its revenues.

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The Seattle-based company continues to spend heavily on marketing, retail, media and new technology. Heavy spending under its “spend to grow” strategy holds the key to the expected losses. Amazon’s Prime service continues to attract new subscribers despite the price hike earlier this year. RBC Capital Markets analyst Mark Mahaney said earlier this week that solid growth in the company’s general merchandise sales has driven the stock’s bullish performance in the past couple of years.

Mahaney believes the trend will continue. He forecasts Amazon’s Q2 gross margins at 30.2%, an increase of 160 basis points from last year. RBC Capital expects the online retail giant to report $19.27 billion in quarterly revenues and non-GAAP loss of 13 cents a share. Operating income is expected to come in at $393 million. Mark Mahaney has an Outperform rating on Amazon with $400 price target.

Baidu Q2 earnings preview

Analysts on average expect Baidu’s second-quarter revenues to jump 58.40% YoY from CNY 7.56 billion to CNY 11.98 billion. However, its earnings are unlikely to grow as strongly during the quarter. The Chinese company has already warned investors that it will be investing heavily in new product categories, resulting into little or no earnings growth this year. Analysts still expect Baidu’s June quarter earnings to rise slightly from CNY 7.52 to CNY 8.19.

Deutsche Bank analyst Alan Hellawell expects the Chinese Internet company to report revenues of CNY 12 billion ($1.94 billion), up 59.2% from the corresponding quarter last year. Hellawell forecasts non-GAAP earnings to jump a modest 5.7% to CNY 3.2 billion ($520 million). The company’s operating margins are expected to decline by 13.3% from the previous year.

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