Can Strong Q4 Earnings Boost Baidu Inc (BIDU) Share Prices? by Estimize
Baidu, Inc. (BIDU) Information Technology – Internet, Software & Services | Reports February 25, After Market Closes
Baidu Inc (BIDU) Q4 Earnings – Key Takeaways
- The Estimize consensus is calling for EPS of $0.87, 1 center higher than Wall Street, and revenue expectations of $2.783 billion, roughly 52 million higher than the Street
- Baidu’s efforts to expand its services outside of search on top of the economic slowdown in China is expected to weigh heavily on the company’s margins and profitability.
- Baidu is prepared to invest over $3 billion in its O2O business with the expectations that it will be the company’s biggest growth driver in the long term
- What are you expecting for BIDU? Get your estimate in here!
China’s equivalent to Google, Baidu, is scheduled to report fourth quarter earnings February 25, after the market closes. The search giant is coming off a better than expected third quarter where it beat on both the top and bottom line. The upcoming earnings report is of the utmost importance as it is expected to paint a clearer picture of the company’s expansion in the online-to-offline market. The Estimize community has been pessimistic in regards to Baidu’s profitability, revising their EPS estimate down 18% since the company last reported. As a result the Estimize consensus is calling for EPS of $0.87, 1 center higher than Wall Street, and revenue expectations of $2.783 billion, roughly 52 million higher than the Street. However our Select Consensus, a weighted average of the most historically accurate analysts and most recent estimates, is showing a slightly more modest beat of 1 cent. Compared to Q4 2014, this represents a projected YoY decline on the bottom line of 45% while sales are projected to increase by 23%. Baidu’s efforts to expand its services outside of search on top of the economic slowdown in China is expected to weigh heavily on the company’s margins and profitability.
Moving forward, Baidu’s primary focus has been expanding its position in the O2O market in an effort to compete against Alibaba in the ecommerce space. The company is prepared to invest over $3.2 billion in its O2O business over the next 3 years with the hope that it will revitalize share prices. The O2O models works on a similar premise to Groupon, where customers online are directed to offline physical store locations. This transition has been a massive undertaking, with operating profit falling by more than third in part because of rising costs. Baidu’s commitment to O2O over the long term is not expected to alleviate the pressure on margins in the near term. Moreover, the economic slowdown in China coupled with shaken investor confidence has led to a 24.2% plunge in share prices over the past 12 months. Tomorrow’s earnings will be a good indicator of the company’s ability to ride through the volatility and increased costs while maintaining upbeat growth.
Do you think BIDU can beat estimates? There is still time to get your estimate in here!