Friday, October 14, 2011

Baidu to Announce Earnings on Thursday, October 27 (Charts) *Financial Performance Review* BIDU

● Baidu Planet 

Baidu (BIDU) will report Q3 2011 financial results on Thursday, October 27
* Update 1 on 10-21-11 *

Chinese Renminbi (RMB) A rounded conversion rate of RMB6.40 to US$1.00 on 10-13-11 is utilized as an average and estimate in this post. A conversion rate of 6.4635 was utilized at 6-30-11 by Baidu for prior quarter Q2 2011 financial results. The 10-13-11 conversion rate was approximately 6.3647.

Baidu (BIDU) to Announce Earnings

Baidu will report Q3 2011 financial results on Thursday, October 27, 2011, after market close. The conference call will be at 8:00 p.m. ET.

Baidu Future and Past Financial Performance

Earnings per Share
Yahoo Finance Analysts Estimates: $0.83 = RMB5.31 avg, $0.75 low est, $0.91 high est, 18 analysts
Prior Quarter: RMB4.67 = $0.73
Prior Year: RMB3.00 = $0.47
Baidu Outlook: not provided

Total Revenues
Yahoo Finance Analysts Estimates: $618.60M avg, $587.98M low est, $635.80M high est, 17 analysts
Prior Quarter: RMB3,415,022 = $533.60M
Prior Year: RMB2,255,860 = $352.48M
Baidu Outlook: RMB3.95 billion to RMB4.05 billion = $617.19M to $632.81M

Prior Q2 2011 Financial Results
When Baidu reports Q3 2011, the 3 months ended September, financial results on October 27, Baidu should meet or beat various prior quarterly results. These financial results are charted below. These prior quarterly GAAP financial results were:
Total Revenues RMB3,415,022 = $533.60M
Operating Income RMB1,858,451 = $290.38M
Net Income RMB1,632,638 = $255.10M
Earnings per Share - Diluted RMB4.67 = $0.73
Cash Flow per Share RMB35.40 = $5.53
Gross Profit Margin 74.22%
Operating Income Margin 54.42%
Net Income Margin 47.81%

Overall, Baidu's Q3 is expected to exceed Q2 financial results and easily beat YoY. Baidu should be close to the analysts' average EPS of $0.83 = RMB5.31. Utilizing Baidu's Outlook on Total Revenues as a starting point, our estimate of EPS for Q3 is a minimum $0.79 to $0.81 or RMB5.08 to RMB5.21. Baidu should beat QoQ on Total Revenues, Operating Income, Net Income, Earnings per Share, and Cash Flow per Share. Any misses will be a disappointment and call into question Baidu's growth in the world's largest Internet market. Baidu should meet or be very close QoQ on Gross Profit Margin, Operating Income Margin, and Net Income Margin.

* Unless otherwise noted, currency amounts are in Chinese Renminbi (RMB) *

Baidu Reports Record-Crushing Earnings!: Astonishing acceleration of EPS +52% QoQ & +95% YoY!

Baidu Summary Q2 2011 Baidu not only reported record-crushing financial results, but is apparently crushing the competition in China. New record highs were total revenues, operating income, net income, earnings per share, operating margin, and net margin. Return on assets is an astronomical 44.72%! As expected, the prior Q1 was the seasonal and cyclical annual "bottom" for Baidu, but the acceleration of financial performance was astonishing in Q2. Q3 and Q4 should each set the bar even higher. The expectations continue sky high for Baidu in the world's largest Internet market. Financial position is very strong and very liquid. Robin Li, Chairman and CEO, attributed the financial performance to "strong traffic growth and improved monetization". The currency translation at June 30, 2011 utilized by Baidu was RMB6.4635 to US$1.00.

Baidu Income Statement Q2 2011 Baidu financial performance was an astonishing acceleration with total revenues RMB3.42 billion, net income RMB1.63 billion, earnings per share RMB4.67 ADS. From the prior near-record setting quarter Q1 2011, QoQ, total revenues were up +40%, net income up +53%, and earnings per share up +52%. From the prior year Q2 2010, YoY, these were up +78%, +95%, and +95%, respectively. Gross, operating, and net margins increased QoQ to 74.22%, 54.42%, and 47.81% compared to Q1 2011 of 72.51%, 49.04%, and 43.94%, respectively. All 3 improved YoY compared to Q2 2010. All of this data is summarized in the charts below.

Baidu Balance Sheet Q2 2011 Total assets increased an impressive +16% QoQ and an astounding +85% YoY to a record high RMB14.37 billion. The capital to assets ratio (total stockholders' equity divided by total assets) is a very solid 77.82%. Baidu is incredibly liquid with a current ratio (current assets divided by total assets) of 77.86%.  Baidu has over RMB10.2+ billion in cash, cash equivalents, and short-term investments. Return on assets continues at astronomical levels and increased again to 44.72%.

Baidu Outlook Q3 2011 The Baidu outlook for Q3 2011 is very strong, and record-breaking, total revenues of RMB3.95 billion to RMB4.05 billion, which would exceed the Q2 2011 quarterly record of RMB3.42 billion. If the gross and net margins can be sustained at the current very high levels, the remainder of 2011 looks outstanding. Baidu states, "Baidu currently expects to generate total revenues in an amount ranging from RMB3.950 billion($611.1 million) to RMB4.050 billion ($626.6 million) for the third quarter of 2011, representing a 75.1% to 79.5% year-over-year increase. This forecast reflects Baidu's current and preliminary view, which is subject to change." Baidu may provide additional information on their outlook in the earnings conference call, which is not reviewed here.

Baidu Financial Performance by the Quarters (Charts)

Baidu Earnings Per Share Below is a chart of quarterly earnings per share. Current Earnings per Share of RMB4.67 increased +52% QoQ and +95% YoY and is a record high.  Earnings per Share has been above RMB3.00 for 4 consecutive quarters and increased 5 of the past 6 quarters. Recent chart data is:
Quarter, Earnings per Diluted Share
Jun10: RMB2.40
Sep10: RMB3.00
Dec10: RMB3.32
Mar11: RMB3.06
Jun11: RMB4.67

Baidu Cash Flow Per Share Below is a chart of quarterly cash flow from operations per share. Current Cash Flow per Share of RMB35.40 increased +27% QoQ but decreased slightly RMB-0.11 YoY. Cash Flow per share has increased 6 of the past 8 quarters QoQ. The all-time high continues to be Q4 2010 of RMB50.64. Recent chart data is:
Quarter, Cash Flow per Diluted Share
Jun10: RMB 35.51
Sep10: RMB 36.33
Dec10: RMB 50.64
Mar11: RMB 27.96
Jun11: RMB35.40

Baidu Total Revenues, Operating Income, and Net Income Below is a chart of quarterly total revenues, operating income, and net income. Current Total Revenues of RMB3.42 billion is a record high, increased impressively +40% QoQ and +78% YoY, and have increased 5 of the past 6 quarters. The prior Q4 2010 of RMB2.45 billion had been the all-time high. Current Operating Income of RMB1.86 billion is a record high and has increased 5 of the past 6 quarters. The prior Q4 2010 of RMB1.27 billion had been the all-time high. Current Net Income of RMB1.63 billion is a record high, increased an astounding +53% QoQ and +95% YoY, and has increased 5 of the past 6 quarters. The prior Q4 2010 of RMB1.16 billion had been the all-time high. Recent chart data is:
Quarter, Total Revenues, Operating Income, Net Income
Jun10: RMB 1.91B, 972M, 837M
Sep10: RMB 2.26B, 1.18B, 1.05B
Dec10: RMB 2.45B, 1.27B, 1.16B
Mar11: RMB 2.44B, 1.19B, 1.07B
Jun11: RMB 3.42B, 1.86B, 1.63B

Baidu Gross Margin, Operating Margin, and Net Margin Below is a chart of quarterly gross margin, operating margin, and net margin. Overall, these have been incredible margins. Current Gross Margin of 74.22% is a rebound from the prior Q1 2011 4-quarter low of 72.51%. Gross Margin has now been above 70% for 5 consecutive quarters. Current Operating Margin of 54.42% is a record high and has been above 50% for 4 of the past 5 quarters. That one quarter below, Q1 2011, was 49.04%. Current Net Margin of 47.81% is a record high and has been above 40% for 5 consecutive quarters. Recent chart data is:
Quarter, Gross Margin, Operating Margin, Net Margin
Jun10: 72.92%, 50.76%, 43.74%
Sep10: 74.57%, 52.37%, 46.40%
Dec10: 74.26%, 52.01%, 47.35%
Mar11: 72.51%, 49.04%, 43.94%
Jun11: 74.22%, 54.42%, 47.81%

Baidu Return on Assets Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. ROA continues at astronomical levels. Current Return on Assets of 44.72% is yet another amazing new peak and has increased 6 consecutive quarters on the chart. Recent chart data is:
Quarter, Return on Assets
Jun10: 36.51%
Sep10: 39.61%
Dec10: 43.19%
Mar11: 43.70%
Jun11: 44.72%

Baidu Growth Rates Below is a chart of the annual (YoY, Y/Y, annual change) growth rates for revenues and earnings per share. Baidu, as with some other technology companies, has an annual cyclical high in Q4 and an annual cyclical low in Q1. Therefore, comparing YoY growth rates best reflects Baidu's growth. Baidu has been a high growth technology company and stock. Current Total Revenues Growth of +78.39% continues the very strong growth. Current Earnings per Share Growth of +94.58% also continues the very strong growth. Recent chart data is:
Quarter, Total Revenues Growth %, Earnings per Share Growth %
Jun10: +74.44%, +118.18%
Sep10: +76.42, +24.98%
Dec10: +94.38%, +169.92%
Mar11: +88.28%, +121.74%
Jun11: +78.39%, +94.58%

Traffic Acquisition Costs Below is a chart of traffic acquisition costs (TAC) as a percentage (%) of total revenues. This is a direct cost and the net is the gross profit before other expenses are allocated to cost of revenues. TAC has been trending downwards which means increased gross profit for Baidu. Current Traffic Acquisition Costs of 7.88% is a record low and and decreased 5 of the past 6 quarters. Recent chart data is:
Quarter, TAC as a % of Total Revenues
Jun10: 9.69%
Sep10: 8.94%
Dec10: 8.14%
Mar11: 8.15%
Jun11: 7.88%

Operating Expense Ratio Below is a chart of the quarterly operating expense ratio, which is operating expenses divided by total revenues. The current Operating Expense Ratio of 19.80% sets a new low. The OER chart average of 25.25%. This indicates in the current QE June 2011 both increased efficiency plus a higher proportion of revenues reaching the bottom line, net income and earnings per share. Recent chart data is:
Quarter, Operating Expense Ratio
Jun10: 22.16%
Sep10: 22.21%
Dec10: 22.24%
Mar11: 23.47%
Jun11: 19.80%

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