U.S. Markets close in 4 hrs 54 mins

Can Solid Product Portfolio Aid Baidu's (BIDU) Q1 Earnings?

Zacks Equity Research

Baidu, Inc. BIDU is expected to report first-quarter 2019 results on May 16.

The company topped the Zacks Consensus Estimate in the trailing four quarters, with average of 23.15%.

In the last reported quarter, Baidu delivered a positive earnings surprise of 13.61%. Fourth-quarter 2018 earnings of $1.92 per share declined 30.7% sequentially. However, revenues increased 22% year over year to RMB 27.2 billion ($3.96 billion).

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. Moreover, strong focus on leveraging the AI platform is aiding it to provide an improved user experience.

The company is leaving no stone unturned to bolster its presence in the autonomous driving space. In the first quarter, Baidu announced new product launches and solutions in a bid to expand footprint in this space. The innovative product portfolio is likely to aid the company to further penetrate into the self-driving market, where in safety and the prevention of accidents are most important.

Per Grand View Research data, the AI market is expected to hit $35.9 billion by 2025 at a CAGR of 57.2%, with 2017 as the base year. The projected figure takes into account direct revenue sources. Given huge growth prospects of the industry, Baidu is putting its best foot forward to seize a major share of the projected revenue growth.

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

For first-quarter 2019, Baidu expects revenues between RMB 23.5 billion ($3.42 billion) and RMB 24.7 billion ($3.60 billion), representing a year-over-year increase of 18-24%, excluding revenues from announced divestitures. The corresponding Zacks Consensus Estimate for the quarter to be reported is pegged at $3.61 billion.

Concerns

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

Increasing competition from players like Google, Alibaba and WeChat remains a concern, and might affect the 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 #5 (Strong Sell) and an Earnings ESP of -4.63%, 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.

Baidu, Inc. Price and EPS Surprise

 

Baidu, Inc. Price and EPS Surprise

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

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.

Target Corporation TGT has an Earnings ESP of +0.42% and a Zacks Rank #2.

Intuit Inc. INTU has an Earnings ESP of +0.59% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Netflix, Inc. NFLX has an Earnings ESP of +0.23% and a Zacks Rank #3.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
Baidu, Inc. (BIDU) : Free Stock Analysis Report
 
Intuit Inc. (INTU) : Free Stock Analysis Report
 
Target Corporation (TGT) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research