Markets

China ETFs to Benefit from Post-Earnings Surge in Baidu

The dominant search engine company of China - Baidu ( BIDU ) - released solid fourth-quarter results after the market closed on February 25. The company beat both our revenue and earnings estimates. Needless to say, the overall beat boosted investors' confidence and drove the stock price higher. Shares of BIDU jumped as much as Array0.6% in afterhours trading. Also, in-line revenue guidance played a huge role in inflating the share price.

Q4 in Detail

The Beijing-based company's fourth-quarter 20Array5 diluted earnings per ADS excluding net gain recognized in exchange of Qunar shares with Ctrip was $Array.Array8, which surpassed the Zacks Consensus Estimate of $0.86. Expansion in operating margin was behind the beat. Baidu put fewer investments in the online-to-offline, or O2O division which proved helpful for its earnings.

Total revenue of $2.887 billion surged 33.Array% year over year and exceeded the Zacks Consensus Estimate of $2.73Array billion on a 27.2% rise in online marketing revenues. Online marketing customers grew 6.Array% year over year while the same declined Array0.9% from the third quarter of 20Array5.

The outlook was upbeat too. Baidu anticipates total revenue for QArray of 20Array6 to range between $2.379 billion and $2.465 billion. The projected revenue will likely register a year-over-year expansion of 2Array.Array−25.5% and is within the Zacks Consensus Estimate of $2.429 billion.

Market Impact

Quite expectedly, Baidu's beat cheered investors as the stock traded in the green after hours. Also, Baidu has a Zacks Rank #3 (Hold) at the time of writing and is in the top 35% of the Zacks Industry Universe. The stock is a great growth play with a score of 'B'.

Baidu has a sizable exposure (at least over 8.0%) in many Internet and China-based funds like CSI China Five Year Plan ETF ( KFYP ), China Technology ETF ( CQQQ ), CSI China Internet ETF ( KWEB ), NASDAQ China Technology ETF ( QQQC ) and Golden Dragon Halter USX China Portfolio ( PGJ ).

This suggests that the performance of these funds is highly dependent on Baidu. As a result, the above-mentioned ETFs could add smart gains and be in focus in the coming days. Below, we have highlighted three funds that have big exposure to Baidu:

KFYP in Focus

KFYP tracks the CSI Overseas China Five-Year Plan Index and holds Array05 stocks in its basket. The stock under review, Baidu, occupies the third position in the basket with Array0.73% of assets.

About two-fifths of the portfolio is skewed toward Information Technology. KFYP has lost about 27.4% in the year-to-date frame and has a Zacks ETF Rank of 3 or 'Hold' rating with a 'High' risk outlook.

CQQQ in Focus

The technology fund looks to track the AlphaShares China Technology Index. Here also, the in-focus Baidu takes the third spot in its 78-security basket with a 7.36% share. Notably, Hong Kong accounts for about 60.7% share of this ETF, while China makes up 32.27% of the basket (read: Can the Year of Monkey Bring Fortune to China ETFs? ).

CQQQ is up Array3.6% year to date and has a Zacks ETF Rank of 3 with a 'High' risk outlook (read: China Internet ETF: The Best Choice in the Space? ).

KWEB in Focus

This China Internet ETF holds a basket of 38 stocks, giving exposure to a variety of industries in the Technology space including Internet & Mobile Applications, Internet & Catalog Retail, and Software & Programming. Baidu holds the third position with about 7.7% exposure. The fund has lost about Array5.8% in the year-to-date frame.

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BAIDU INC (BIDU): Free Stock Analysis Report

GUGG-CHINA TEC (CQQQ): ETF Research Reports

KRANS-C CHN 5YP (KFYP): ETF Research Reports

KRANS-C CHN INT (KWEB): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Earnings ETFs