Baidu Inc (BIDU) Q1 Earnings: What To Expect

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Chinese search engine giant Baidu is scheduled to release its fiscal Q1, 2015 results on Wednesday, April 29th after the U.S. markets close. Baidu has already warned that increased investments would “significantly pressure profitability” in the first quarter. The company’s transition to mobile will also affect its revenue growth as mobile ads make money at a lower rate than desktop ads.

Baidu’s revenue expected to jump 37%

During its fourth-quarter earnings call, Baidu guided its Q1 revenue between $2.03 billion and $2.10 billion, a growth of 33.5% to 38% from the corresponding quarter a year ago. Analysts polled by Thomson Reuters expect Baidu’s top line to come in at $2.08 billion, up 37% from $1.52 billion in the year-ago quarter. However, analysts are not equally optimistic about its earnings.

Wall Street estimates Baidu’s earnings to come in at $1.04 a share, down 16% from $1.16 in the same quarter last year. The Beijing-based company is spending heavily on sales, marketing and R&D that may weigh on its earnings. But Oppenheimer analysts remain bullish on the stock. In a research note to investors, Oppenheimer said Monday that the company’s operating expenditure slowed during the March quarter, which would reflect in its earnings.

Can Baidu resolve the dispute with private hospitals?

For the current quarter, Wall Street estimates revenue of $2.6 billion with $1.81 per share in earnings. Baidu management believes that heavy spending to strengthen its mobile offerings will pay off in the long-run. In FY2014, the company’s SG&A expenses skyrocketed 69%, while R&D expenses shot up 70%. Investors will pay particular attention to its spending when Baidu releases its first-quarter results.

Investors will also be looking for details on Baidu’s high-stakes clash with a group of 8,600 private hospitals that have refused to advertise on its platforms. JPMorgan analysts said that those private hospitals accounted for 5%-12% of Baidu’s revenue last year, and their boycott may affect the company’s income this year.

Baidu shares fell 0.76% to $218.79 at 10:25 AM EDT on Tuesday. The stock has gained 45% in the last 12 months.

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