Will Mobile Growth Help Baidu (BIDU) Beat on Q3 Earnings?

Baidu, Inc.BIDU is set to report third-quarter 2017 results on Oct 26. Last quarter, the company delivered an impressive positive earnings surprise of 66.20%.

Notably, Baidu surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 65.12%.

Also, shares of Baidu have gained 62.0% year to date, outperforming the industry 's 27.5% rally.

Let's see how things are shaping up for this announcement.

Baidu's dominance in the mobile search market and its consistent product development efforts remain positives. In the last quarter, the company witnessed significant improvement in its flagship Mobile Baidu app with version 9.0. The company saw strong user adoption for Mobile Baidu, with robust DAU growth. Also, feed user adoption and feed daily active users remained strong. The company expects the momentum to continue in the upcoming quarter.

Moreover, the company's focus on using AI techniques - machine learning, deep learning and natural language processing - has helped it in providing more useful and personalized search results. The company has been using AI techniques to expand its presence in the self-driving vehicle space and cloud, among others. These initiatives have helped the company to witness strong momentum in customer additions and revenues, which will continue in the upcoming third quarter.

On the monetization front, Baidu added nearly 20,000 online active customers sequentially across a range of industries, including education, auto, logistics and the local services. The company's customer base is expected to grow in the upcoming quarter, driven by improved product quality, usage growth in feed and increased diversification.

However, increasing competition on its own search platform and higher expenses incurred as part of new investments could affect top-line growth in the to-be-reported quarter.

For the third quarter, management expects revenues in the range of RMB23.130 billion (or $3.412 billion) to RMB23.750 billion (or $3.503 billion), representing a year-over-year increase of 26.7-30.1%. The Zacks Consensus Estimate is pegged at $3.44 billion.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Baiduhas a Zacks Rank #2 but an Earnings ESP of -8.80% and that does not indicate a likely positive surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Baidu, Inc. Price and EPS Surprise

Baidu, Inc. Price and EPS Surprise | Baidu, Inc. Quote

Stocks to Consider

You could also consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank.

Applied Materials, Inc. AMAT , with an Earnings ESP of +0.37% and Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Texas Instruments Incorporated TXN , with an Earnings ESP of +0.07% and Zacks Rank #2.

Extreme Networks, Inc., EXTR with an Earnings ESP of +9.75% and a Zacks Rank #3.

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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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