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Can Solid Product Portfolio Aid Baidu's (BIDU) Q2 Earnings?

Zacks Equity Research

Baidu, Inc. BIDU is expected to report second-quarter 2019 results on Jul 30.

The company topped the Zacks Consensus Estimate in the trailing three quarters, with average positive surprise of 10.58%.

In the last reported quarter, Baidu reported adjusted earnings of 41 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line decreased 78.6% sequentially and 84.2% year over year.

Weaker-than-expected online marketing environment, a slowdown in China and higher expenses could impact the upcoming results.

Baidu, Inc. Price and EPS Surprise

 

Baidu, Inc. Price and EPS Surprise

Baidu, Inc. price-eps-surprise | Baidu, Inc. Quote

Expanding Product Portfolio to Drive Results

Baidu’s continuous efforts to strengthen its mobile search engine and AI technologies are likely to drive top-line growth. Strong focus on leveraging the AI platform has been aiding it to provide an improved user experience, which is a positive for the quarter to be reported.

The company is leaving no stone unturned to bolster presence in the autonomous driving space. In the second quarter, Baidu announced new product launches and solutions in a bid to expand footprint in this space.

Hence, we believe that Baidu’s strong focus on product innovation and expansion is likely to favor second-quarter results.

For second-quarter 2019, it expects total revenues in the range of RMB25.1 billion (or $3.74 billion) to RMB26.6 billion (or $3.96 billion), indicating a year-over-year increase of (3)-2%. The corresponding Zacks Consensus Estimate for the quarter to be reported is pegged at $3.80 billion.

Concerns

The company is making heavy investments in a bid to continuously diversify business from mobile internet into smart home, cloud and autonomous driving markets. These mounting investment costs might further increase operating expenses of the company and impact the bottom line.

Increasing competition from players like Google, Alibaba and WeChat remains a concern. This might in turn affect its upcoming results. Further, slowing economy and macroeconomic headwinds in China remain risks.

All these factors do not bode well for Baidu’s performance in the to-be-reported quarter.

What Our Model Says

Currently, Baidu has a Zacks Rank #3 (Hold) and an Earnings ESP of -22.83%, a combination that makes surprise prediction difficult. This is because per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement.

Stocks to Consider

Here are some stocks that you may want to consider, as our model shows that these have the right combination of elements to deliver a positive earnings surprise in the upcoming releases.

Groupon, Inc. GRPN has an Earnings ESP of +25.00% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Grubhub Inc. GRUB has an Earnings ESP of +12.04% and a Zacks Rank #3.

Waters Corporation WAT has an Earnings ESP of +0.59% and holds a Zacks Rank #3.

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Groupon, Inc. (GRPN) : Free Stock Analysis Report
 
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