Baidu: What To Expect
Estimize | Apr 24, 2014 12:13PM ET
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Baidu Inc. (NASDAQ:BIDU) is set to report FQ1 2014 earnings after the market closes on Thursday, April 24th. Baidu is the number one search engine in the world’s most populated country and is often called the Google of China. Wall Street is expecting flat profit compared to last year alongside a 52% increase in revenue. If Google is any sort of indicator for how Baidu will perform this quarter, things look bleak. On April 16th Google released its quarterly earnings report, beating EPS estimates but missing the Street’s revenue consensus by over $500 million. Here’s what investors expect from Baidu Thursday evening.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Baidu to report 94c EPS and $1.460B revenue while the current Estimize.com consensus from 43 Buy Side and Independent contributing analysts is $1.02 EPS and $1.466B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Baidu to beat the Wall Street consensus on EPS by a significant margin while reporting in-line on revenue.
Over the previous 6 quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting Baidu’s EPS and revenue once and 5 times respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by Deutsche Bank Quant. Research and an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a slightly larger difference between the two groups’ EPS expectations and almost no difference in revenue projections.
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The distribution of estimates published by analysts on the Estimize.com platform range from 90c to $1.30 EPS and from $1.300B to $1.570B in revenues. This quarter we’re seeing a wider distribution of EPS projections on Baidu and a moderate distribution of revenue estimates.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signals less agreement in the market, which could mean greater volatility post earnings.
Over the past 4 months the Wall Street EPS forecast fell from $1.04 to 94c while the Estimize consensus gradually declined from $1.15 to $1.02. Meanwhile Wall Street raised its revenue projection marginally from $1.448B to $1.460B while the Estimize consensus climbed from $1.334B to $1.466B. Timeliness is correlated with accuracy and the directionality of analyst revisions are often a leading indicator. Here we saw sinking EPS estimates alongside rising revenue expectations.
The analyst with the highest estimate confidence rating this quarter is TechStockRadar who projects 96c EPS and $1.470B in revenue. TechStockRadar is ranked 14th overall among 4,250 contributing analysts. Over the past 2 years TechStockRadar has been more accurate than Wall Street in forecasting EPS and revenue an impressive 67% and 64% of the time respectively throughout 450 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case TechStockRadar is expecting Baidu to beat Wall Street’s expectations on the top and bottom line by a small margin, but fail to live up to the high EPS consensus from the Estimize community.
This quarter Wall Street expects Baidu to report an EPS decrease of 1c per share compared to FQ1 of last year while the Estimize community is calling for a gain of 7c per share. Both groups have relatively similar revenue growth expectations, the Estimize community predicts year over year revenue will be up 52.5%. Hopefully Baidu doesn’t follow suit with Google this quarter and come up way short on sales.
Get access to estimates for Baidu published by your Buy Side and Independent analyst peers and follow the rest of earnings season by heading over to Estimize.com. Register for free to create your own estimates and see how you stack up to Wall Street.
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