Sohu.com, Inc.

Sohu.com Inc. (SOHU - Analyst Report) is one of China's largest web networks, running 7 Chinese language web properties and proprietary search engines. The company has been on fire as Internet access expands across China and its growing middle class. Analysts expect 2008 year over year earnings growth of 293.89%.

Sohu.com's Revenue Explodes

On Jul 28, the company reported second quarter earnings and beat its own prior guidance and Wall Street estimates by 45.71%, or 32 cents per share. Net income surged 60.1% to $40.2 million, or $1.02 per share, from $25.1 million, or 64 cents in the year-ago period.

Revenues continued to soar, rising 162%, and 20% quarter-on-quarter, to $102 million from $39 million in the second quarter of 2007. Total revenues exceeded $100 million for the first time in the company's history. Advertising revenues were hot, growing 53% year-over-year to $43.4 million.

Sohu.com was the Internet Content Sponsor for the Beijing 2008 Olympic Games. In its second quarter report in July, the company was optimistic that the Games would expand its market penetration in China and spur growth for the remainder of 2008.

Third Quarter Revenue Expected to Grow

Sohu.com issued third quarter revenue guidance of between $112 million to $116 million and expects advertising revenues of $48.5 million to $50.5 million.

Consensus Estimates Spike Higher

The last four quarters, Sohu.com has easily surprised on estimates on average of 28.41%. Given its track record of growing earnings, covering analysts have been scrambling to raise estimates on the third quarter and the full year.

Third quarter estimates rose 30 cents to 98 cents in the last 60 days. Full year estimates jumped 28.69% in the last month to $3.55 from $2.76.

Fundamentals Are Solid

Shares of Sohu.com have tumbled since July due to the challenging market environment. Sohu.com is now trading in value territory, with a forward price-to-earnings (P/E) of just 14.22. The company also has an outstanding one year return on equity (ROE) of 35.69%.