Baidu Inc (NASDAQ:BIDU) is set to report Q3 earnings after the close with a conference call to follow at 9:15pm ET. Consensus estimates are calling for about $2.53 on EPS, with revs coming in around $4.02 bln. At this point, it still isn’t clear if analyst estimates on revs will leave in divestitures. So keep that in mind on the print.
The stock has been beaten up into the report – along with basically everything else in the space. BIDU has been taking it from both sides, being a so-called FAANG-BAT member – the club of stocks that is almost universally understood as being overly crowded but owning the most growth momentum and the most severe declines in share prices over the past 3 weeks (along with FB, AMZN, AAPL, NFLX, GOOGL, BIDU, Alibaba, and Tencent), and also being a leadership play in a Chinese market that has been rocked by the tariff policy out of the White House
Baidu Inc (NASDAQ:BIDU) has guided for Q3 revs of $4.02-4.23 bln (23-30% y/y) and $3.91-4.11 bln (26-33%) excluding the impact from announced divestures. The Capital IQ consensus stands at $4.02 bln but a break down fails to provide details on the divestitures.
BIDU reported Q2 (Jun) earnings of $3.18 per ADS, excluding items, $0.59 better than the Capital IQ Consensus of $2.59. Revenues were $3.93 bln vs the $3.89 bln Capital IQ Consensus.
Adjusted EBITDA was R$1.12 bln or 29% of total revenues.
Mobile revenue represented 77% of total net revenues, compared to 72% for the second quarter of 2017.
Content costs were RMB 5.2 billion ($788 million), representing a 68% increase year over year. The year-over-year increase was mainly due to iQIYI’s increased content costs and, to a lesser extent, increased investment in BJH, Baidu feeds’ content network.
Baidu also announced a $1 billion share repurchase program in June 2018, which is effective for 12 months. From the announcement of the program to the end of Q2, the Company has given back to its shareholders approximately $186.8 million.
Handicapping
As far as relative valuations, BIDU is currently trading at 15.8x forward earnings. That compares with GOOGL- at 21.9x and YNDX at 19.7x. That’s a clear suggestion of relative value.
So, from probably all angles here, any kind of upside surprise out of the company could be handsomely rewarded tomorrow provided we don’t have a serious new tariff escalation.
Technically, the stock is trading beneath its major moving averages after falling as much as 35% off its all-time highs, which were logged earlier this year. The moves in the stock largely mirror the timing and direction of swings in Chinese equity indices so far this year, suggesting that confidence in exposure to Chinese stocks amid a trade war with the country’s biggest and most important customer has been sharply weighing on performance.
However, as noted above, that sets us up for some low-bar expectations, and valuations are well-under where we see other comparable names.
The company typically reports well after the close, so don’t look for it at the bell. It could be an hour later.