Baidu (BIDU) Earnings And Revenues Beat Estimates In Q2

Baidu, Inc. (NASDAQ:BIDU) reported adjusted second-quarter 2019 earnings of $1.47 per share, surpassing the Zacks Consensus Estimate of 94 cents.

China’s largest search engine reported revenues of RMB26.3 billion ($3.84 billion), up 9% sequentially and 1% year over year. The top line was also up 6% year over year, excluding revenues from divested business. Also, total revenues marginally surpassed the Zacks Consensus Estimate of $3.77 billion.

In the second quarter, revenues from Baidu Core reached RMB 19.5 billion ($2.85 billion), down 2% year over year, while that of iQIYI touched RMB 7.1 billion ($1.04 billion), increasing 15% year over year. Revenues from QIYI membership services grew 38% year over year, while the same from online advertising fell 16% year over year.

Revenue Sources

Revenues from online marketing services were RMB19.2 billion ($2.80 billion), down 9% from the year-ago quarter but up 9% sequentially. It accounted for 73% of its total revenues. The increase was driven by strength in education, retail and business services.

Revenues from Other services were RMB7.1 billion ($1.03 billion), up 44% year over year, which contributed the remaining 27% to total revenues. The increase was driven by robust growth in iQIYI membership services, cloud and smart devices.

Baidu, Inc. Price and Consensus

Baidu, Inc. Price and Consensus

Baidu, Inc. price-consensus-chart | Baidu, Inc. Quote

Other Metrics

In the second quarter, Baidu App daily active users reached 188 million, up 27% year over year. DuerOS voice assistant installed base surpassed 400 million, up significantly year over year, and monthly voice queries on DuerOS touched 3.6 billion in the second quarter.

Margins

Reported gross margin was 38.8%, down significantly from the year-ago quarter.

Baidu reported total operating expenses of RMB10 billion, up 16.9% from RMB8.5 billion incurred in the year-ago quarter. As a percentage of sales, both selling, general & administrative expenses, and R&D expenses increased.

This resulted in a GAAP operating margin of 0.9% compared with 20.9% in the year-ago quarter. Non-GAAP operating margin was 7% versus 25% in the year-ago quarter.

Adjusted EBITDA was RMB 3.4 billion ($489 million) and adjusted EBITDA margin was 13% in the quarter.

Balance Sheet & Cash Flow

Baidu exited the second quarter with cash, cash equivalents, restricted cash and short-term investments of approximately RMB 137.3 billion ($20.00 billion). Excluding iQIYI, cash, cash equivalents, restricted cash and short-term investments were RMB 120.9 billion ($17.61 billion).

Free cash flow was RMB 5.6 billion ($817 million) in the second quarter. Excluding iQIYI, free cash flow was RMB 4.9 billion ($710 million).

Guidance

For third-quarter 2019, Baidu expects total revenues in the range of RMB26.9 billion (or $3.84 billion) to RMB28.5 billion (or $4.07 billion), indicating a year-over-year increase of (5)-1%. The Zacks Consensus Estimate for revenues is pegged at $4.12 billion.

Zacks Rank and Stocks to Consider

Currently, Baidu has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Alphabet Inc. (NASDAQ:GOOGL) , Itron, Inc. (NASDAQ:ITRI) and Teradyne, Inc. (NASDAQ:TER) , each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Alphabet, Itron and Teradyne is currently projected at 17.5%, 25% and 11.4%, respectively.

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