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Can Baidu (BIDU) Pull Off a Surprise this Earnings Season?

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Baidu, Inc. (BIDU - Free Report) is set to report first-quarter 2017 results on Apr 27. Last quarter, the company posted an impressive 72.04% positive earnings surprise.

Over the past one year, shares of Baidu underperformed the Zacks categorized Internet Services industry. While the industry gained 15.7%, the stock returned a loss of 0.5%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Baidu posted strong fourth-quarter results, with both the top and the bottom line beating the respective Zacks Consensus Estimate.

Baidu’s growing 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. The company continues to strengthen its offerings through various agreements in China, where it is pitted against the country’s biggest e-Commerce operator, Alibaba Group Holding Limited.

However, increasing competition on its own search platform and higher expenses incurred from new investments could affect top-line growth in the to-be-reported quarter.

Also, for the first quarter, management expects revenues in the range of RMB16.480 billion (or $2.374 billion) to RMB17.030 billion (or $2.453 billion), representing a year-over-year increase of 4.2–7.6%.

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 63 cents. Therefore, the company’s Earnings ESP is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Baidu has a Zacks Rank #3 which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.

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

Baidu, Inc. Price and EPS Surprise

 

Baidu, Inc. Price and EPS Surprise | Baidu, Inc. Quote

Stocks to Consider

You could consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Fortive Corporation (FTV - Free Report) , with an Earnings ESP of +1.75% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Northrop Grumman Corporation (NOC - Free Report) , with an Earnings ESP of +1.03% and a Zacks Rank #2.

PayPal Holdings, Inc. (PYPL - Free Report) , with an Earnings ESP of +3.03% and a Zacks Rank #3.

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