Once Again, Baidu Blows by You

Analysts just don't get Baidu (Nasdaq: BIDU  ) .

China's leading search engine has once again blown past Wall Street's quarterly targets.

Revenue at Baidu soared 85% to $654.7 million. Adjusted earnings climbed 79% to $301.2 million -- or $0.86 a share. The market was banking on an adjusted profit of $0.83 a share on $618.6 million in revenue.

You can pause long enough to admire the 46% net margins or the fact that Baidu continues to grow at such a heady pace, but let's catch up with the rest of the tour.

I had suggested three things to look for earlier this week. Let's go over the three takeaways.

1. Look for another beat
Baidu has now beaten Wall Street's bottom line for 10 quarters in a row. Let's go over the past four quarters.

Quarter

EPS Estimate

EPS

Surprise

Q3 2011

$0.83

$0.86

4%

Q2 2011

$0.66

$0.72

9%

Q1 2011

$0.45

$0.47

4%

Q4 2010

$0.45

$0.50

11%

Source: Thomson Reuters.

Until this trend reverses and analysts finally catch up to Baidu, the better bet will continue to be betting on another beat.

2. Check out the halo effect
"What's good for Baidu will be seen as good for China's dot-com leaders," I wrote.

We'll see how Sohu.com (Nasdaq: SOHU  ) , video streaming site Youku.com (NYSE: YOKU  ) , and social networking leader Renren (Nasdaq: RENN  ) respond when they report their quarterly results in the coming days, but last night's report out of Baidu clearly sets a bullish tone for China's online companies.

3. Match the guidance to expectations
Baidu only provides top-line guidance, and the Chinese rock star didn't disappoint there either. Baidu is targeting $691.4 million to $711 million in revenue for the current quarter, well ahead of the $647 million that analysts were forecasting.

Yep, this was a blowout quarter in every possible way.

If you want to see where these Chinese stocks go from here, add them to My Watchlist to track news as it happens.

Motley Fool newsletter services have recommended buying shares of Baidu and Sohu.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (3) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 28, 2011, at 5:23 PM, altrue1090 wrote:

    There is no question that Baidu is a great company. The question is whether the government of China will leave it alone.

    Both financially and in terms of censorship of an internet company, I worry.

  • Report this Comment On October 28, 2011, at 11:15 PM, Shanteram wrote:

    If the author doesn't own what he recommends, who cares what he thinks?

  • Report this Comment On November 06, 2011, at 11:00 PM, TMFNoCeilings wrote:

    That's a rather reductive take on things, Shanteram. Not to mention some serious ad hoc: try attacking the argument next time.

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