Can Solid Product Portfolio Aid Baidu's (BIDU) Q4 Earnings?
Zacks Investment Research | Feb 07, 2019 09:18PM ET
Baidu, Inc. (NASDAQ:BIDU) is expected to report fourth-quarter 2018 results on Feb 12.
The company topped the Zacks Consensus Estimate in the trailing four quarters, with average positive earnings surprise of 22.67%.
In the last reported quarter, Baidu delivered a positive earnings surprise of 7.78%. Earnings of $2.77 per share declined 12.9% sequentially. However, revenues increased 27% year over year to RMB 28.2 billion ($4.11 billion).
Product Portfolio & Partnerships 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. Recently, Baidu announced new product launches and solutions at CES 2019 in a bid to boost its footprint in this space. The company unveiled Apollo 3.5, the latest version of Apollo open source driverless car platform. It also introduced Apollo Enterprise, which is a suite of customizable autonomous driving solutions for vehicle fleets.
These developments are likely to aid the company in rapidly penetrating 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 the huge growth prospect 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 fourth-quarter results.
For the fourth quarter of 2018, Baidu expects revenues between RMB 25.48 billion ($3.71 billion) and RMB 26.72 billion ($3.89 billion), representing a year-over-year increase of 15-20%, excluding revenues from announced divestures. The corresponding Zacks Consensus Estimate for the quarter to be reported is pegged at $3.88 billion.
What Our Model Says
Currently, Baidu has a Zacks Rank #4 (Sell) and an Earnings ESP Filter .
We don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement.
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