Baidu Earnings Preview
Baidu (NASDAQ: BIDU) is scheduled to report its second-quarter 2011 results Monday, July 25, after the markets close. Investors will be looking for the Chinese-language Internet search engine operator's momentum to continue with another in a string of quarterly earnings surprises.
Analysts are looking for the company to report per-share earnings of $0.66, which is up from $0.35 per share in the same period of last year, and up a penny from the EPS estimate just 60 days ago. The consensus forecast also calls for revenues of $502.3 million, a surge of 77.9% from a year ago.
As mentioned, analysts have underestimated Baidu's earnings in the past eight quarters. Back in the first quarter, EPS topped consensus estimates by two cents. And analysts so far are looking for sequential and year-over-year growth of both earnings and revenue in the current quarter.
Beijing-based Baidu provides Chinese and Japanese language Internet search services. The company also offers online entertainment platforms, an instant messaging service and a consumer-oriented e-commerce platform. And it sells online marketing services. The company was founded in 2000.
During the three months that ended in June, the company announced agreements with Bitauto, a provider of marketing services for China's fast-growing automotive industry, and China Real Estate Information Corporation, a provider of real estate information, consulting and online services. Baidu also said it would invest in Qunar, a leading travel search engine in China.
The company has a long-term earnings per share growth forecast of 43.3%. But the P/E ratio is higher than the industry average, and the PEG ratio is 1.2. Still, the consensus recommendation of analysts is to buy BIDU. Their mean price target (or where analysts expect the share price to go) is $168.23 per share.
The share price ended the week at $154.00, not far from the all-time high of $156.04. Shares are 59.5% higher than at the beginning of the year and nearly double the year-ago price. The stock has outperformed its industry average, as well as competitors Sohu.com (NASDAQ: SOHU) and Google (NASDAQ: GOOG), year to date.
Bullish: Traders interested in exchange traded funds invested in Baidu might want to consider the following trades:
- PowerShares QQQ Trust, Series 1 (NASDAQ: QQQ): +29.4% in the past year
- SPDR S&P China ETF (NYSE: GXC): +8.8% in the past year
- PowerShares Golden Dragon Halter USX China Portfolio (NYSE: PJG): +9.9% in the past year
- SPDR S&P BRIC 40 ETF (NYSE: BIK): +11.9% in the past year
Bearish: Traders pessimistic on China might want to consider this alternative position:
- ProShares UltraShort FTSE/Xinhua China 25 (NYSE: FXP): +287.2% in the past year
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