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Baidu, Inc (BIDU) Information Technology - Internet, Software & Services | Reports April 27, After Market Closes

Key Takeaways

• The Estimize consensus is calling for earnings per share of 97 cents on $2.65 billion, 10 cents higher than Wall Street on the bottom line and $60 million on the top.
• Performance is witnessing a significant slowdown due to higher expenses and the emergence of new competition in China
• Baidu’s market position in search and ad is well above its closest competitors that hasn’t made these near term headwinds appear so threatening
• What are you expecting for BIDU?

China’s leading search engine, Baidu, is scheduled to reports third quarter results today after the closing bell. Baidu is coming off a series of earnings beats but shares have still trended lower for the better part of the year. Expectations are now edging down for the third quarter on analysts are believing to be a sharp decline from prior periods. While Baidu remains the clear leader in search throughout China, increasing competition has put pressure on the company to maintain its market share. New investments to strengthen its offerings are one of the primary reasons for the recent slowdown.

Analysts at Estimize are calling for earnings per share of 97 cents, down 32% from a year earlier. That forecast has dropped 19% since Baidu’s most recent report in July. Revenue for the period is expected to decline 8% to $2.65 billion, marking the first quarter of negative growth in the company’s existence. The clear slowdown has caused shares to cascade about 8% year to date. 

Investors are losing hope that Baidu will ever come close to Google’s success, given its recent woes. In the second quarter, earnings reported a 39% decline from the same period last year while revenue increased a measly 3% over the same timeframe. Baidu’s struggles in the second quarter were primarily driven by sluggish search advertising revenue which many expect to carry through the rest of fiscal 2016. Add to its troubles is the influx of competition flooding the Chinese markets. The region now possesses massive tech companies like Alibaba that pose a significant threat to Baidu’s performance.

It hasn’t be all bad for Baidu though. Its emergence in the online video market is largely expected to improve its competitive position and provide a new layer of support to the top line. Meanwhile, search and ad is still leaps and bound ahead of the competition that even a small pullback wouldn’t hurt Baidu’s market share.