Baidu Inc (ADR) (NASDAQ:BIDU) is scheduled to release its next earnings report tonight after closing bell in New York. Analysts are expecting the Chinese search giant to report earnings per share of $1.67 on revenue of $2.2 billion. That’s compared to earnings of $1.48 per share and $1.5 billion in revenue in last year’s third quarter.
What to expect in Baidu’s earnings report
A report from Neil Flynn on Trading Floor suggests a number of things investors might want to look for in tonight’s earnings report. For example, growth in mobile continues to be a focus, not just for Baidu but for all internet-related companies. Baidu’s report should provide some indication about whether it is gaining in share of mobile internet traffic.
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There’s also the issue of video content costs. Baidu acquired iQiyi and PPStream, which are the top two video content companies in China. The report indicates that Youku Tudou and Tencent Video have been bidding up prices for content in both of Baidu’s video services, and the author sees this business model as “becoming unsustainable.” As a result, he wants to see Baidu talk about producing its own content and investing into Korean drama content.
International expansion is also a key issue in Baidu’s report, as the company moves into Brazil through its Portuguese language search engine. In addition, user growth continues to be important for Baidu, just as it is for other internet companies. At the end of June, the search giant had 500 million active mobile search users, and its Baidu Maps app ad almost 70 million active users.
Margins are also a concern, as the company has been making investments that have pressured its margins. Flynn expects margins to continue declining in the third and fourth quarters because management did say they would continue to make investments in growth.
Baidu’s past earnings-related moves
According to a report posted on NASDAQ.com, Baidu shares have declined in after-hours trading in 12 of the last 36 quarters. In seven of them, shares saw the nighttime downside reverse course during the regular trading session the next day.
N the flip side, shares of Baidu gained after the company’s earnings report in 24 of the last 36 quarters, and in 14 of them, the stock reversed direction during regular trading hours the next day.