Leading Chinese Internet search company Baidu (NASDAQ:BIDU) is due to report q4 2015 earnings on Feb. 10th 2016 after market close. During its third quarter earnings call, Baidu said that it expects fourth quarter revenue to be in the range of RMB18.2B-RMB18.75B ($2.864B-$2.950B) which represents year-over-year growth of 29.5%-33.4%. Wall Street sees the company reporting revenue of $2.806B with EPS of $0.80, representing 26.6% and -45% year-over-year growth, respectively. If these estimates turn out to be accurate, then the fourth quarter will extend Baidu’s long streak of shrinking earnings.
Baidu has failed to meet Wall Street’s earnings estimates in three out of the last four quarters, the last quarter being the exception when it exceeded estimates.
Baidu Earnings Surprise History
Quarter End
Reported
Per Share
EPS* Forecast
Surprise
Source: NASDAQ
Shrinking Profits
Baidu stock has come under a lot of pressure lately, partly due to the turmoil in the Chinese equity markets and partly due to the company’s shrinking profits, courtesy of its O2O ventures. Baidu has been investing heavily in O2O, or Online-to-Offline, businesses as it seeks to expand its footprint beyond its core search business. Baidu stock is down 23% YTD and 33% over the past 12 months.
Source: Baidu Stock Price Data by amigobulls.com
During Q3 2015, Baidu introduced a new revenue segment called ‘‘Transactional Services’’ which mainly comprises of its O2O businesses. Baidu’s growing line of O2O ventures include Baidu Takeout Delivery, Baidu Nuomi, and iQiyi. These businesses are expanding at a rapid clip: Baidu Takeout Delivery expanded its GMV (Gross Merchandise Volume) 12-fold year-over-year while Baidu Nuomi saw its GMV increase 475%. Baidu reported that its O2O business had combined GMV of $6.5B during the quarter, up 119% Y/Y.
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