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What’s in the Cards for Baidu (BIDU) This Earnings Season?

Zacks

Baidu, Inc. BIDU is set to report fourth-quarter 2017 results on Feb 13.

Notably, the company has beaten the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 66.72%.

Last quarter, Baidu delivered a positive earnings surprise of 77.63%. Earnings of $3.89 per share surged 64.8% sequentially and 161% on a year-over-year basis.

Revenues increased 29% year over year and 14.6% sequentially to $3.53 billion, and also beat the Zacks Consensus Estimate of $3.46 billion. The year-over-year growth was driven by improving AI technology and mobile foundation.

For fourth-quarter 2017, Baidu expects revenues between $3.34 billion and $3.52 billion, representing 22-29% growth on a year-over-year basis.

Let's have a look on how things are shaping up for this announcement.

Factors to Consider

Baidu’s continuous efforts to strengthen its mobile search engine and AI technologies are likely to drive top-line growth. Strong focus on leveraging AI platform is helping to provide an improved user experience. In the last quarter, the company spun off Baidu Deliveries and mobile games business to focus its resources on AI innovation.

The company experienced 15% growth on a sequential basis in daily user time spent on Mobile Baidu. Videos, user contents, questions & answers, sports, animations and literature are improving at a faster pace on both search and feed that can be attributed to the user base growth.

Moreover, the company witnessed a measurable progress on AI techniques. In September 2017, Baidu launched Apollo 1.5, which is an updated version of its autonomous driving platform. It also formed a partnership with BAIC Group and King Long that is likely to benefit Apollo.

The company also added DuerOS Intelligent Device and DuerOS Bot to the DuerOS platform that is likely to increase user adoption. Moreover, the company remains focused on restricting fake news coming through search results, which is anticipated to boost engagement.

Notably, the implementation of intelligent filtering and advanced presentation technologies drove the percentage of search landing pages beyond 90%, which was 40% at the beginning of 2017.

However, increasing competition on its own search platform and higher expenses incurred as part of new investments could affect top-line growth in the to-be-reported quarter.

Baidu, Inc. Price and EPS Surprise

Baidu, Inc. Price and EPS Surprise | Baidu, Inc. Quote


What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Baidu has a Zacks Rank #4 (Sell) and its Earnings ESP is 2.20%. Therefore, our proven model does not show that the company is likely to deliver a positive surprise this quarter.

Stocks That Warrant a Look

Here are a few stocks worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

The Trade Desk TTD has an Earnings ESP of +4.78% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Micron Technology MU has an Earnings ESP of +1.83% and a Zacks Rank #1.

Broadcom AVGO has an Earnings ESP of +1.08% and a Zacks Rank #3.

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