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Is Disappointment in Store for Baidu (BIDU) Q2 Earnings?

Zacks Equity Research
Updated

Baidu, Inc. BIDU is set to report second-quarter 2016 results on Jul 28. Last quarter, the company posted an impressive 16.67% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors at Play

Baidu posted decent first-quarter results, with the top and the bottom lines beating the respective Zacks Consensus Estimate.

Baidu’s increasing presence in the online video market is likely to improve its competitive position. Also, the company’s strong dominance in the mobile search market and its consistent product development efforts remain positives.

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However, the company lowered its revenue guidance for the second quarter. It now expects sales in the range of RMB18.100 billion ($2.807 billion) to RMB18.200 billion ($2.823 billion), down from its earlier view of RMB20.110 billion ($3.119 billion) to RMB20.580 billion ($3.192 billion).

Management believes that increased scrutiny into healthcare and related ads by regulatory authorities has led to a reduction or delay in spend by a large number of its medical customers. This will likely impact its sales in the second quarter. Also, Baidu has reduced the number of sponsored links across its platform, which will definitely hurt its upcoming advertising revenues and impact total revenue.

BAIDU INC Price and EPS Surprise

BAIDU INC Price and EPS Surprise | BAIDU INC Quote

Earnings Whispers

Our proven model does not conclusively show that Baidu will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 94 cents. Therefore, the company’s Earnings ESP is 0.00%.

Zacks Rank: Baidu has a Zacks Rank #5 (Strong Sell).We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

You may, however, consider the following stocks, with a positive Earnings ESP and a favorable Zacks Rank:

CalAtlantic Group, Inc. CAA has an Earnings ESP of +9.21% and a Zacks Rank #1. The company is slated to report second-quarter earnings results on Jul 28.

Bristol-Myers Squibb Company BMY has an Earnings ESP of +1.49% and a Zacks Rank #1. The company’s second-quarter earnings release date is Jul 28.

Bruker Corporation BRKR has an Earnings ESP of +5.26% and a Zacks Rank #1. The company is slated to report second-quarter earnings results on Aug 2.

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BAIDU INC (BIDU): Free Stock Analysis Report
 
BRISTOL-MYERS (BMY): Free Stock Analysis Report
 
BRUKER CORP (BRKR): Free Stock Analysis Report
 
CALATLANTIC GRP (CAA): Free Stock Analysis Report
 
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Zacks Investment Research