China's leading search engine and the fast-growing video-streaming site it spun off last year will be giving investors new numbers to mull over in a few days, as Baidu (BIDU -2.13%) and its iQiyi (IQ 0.73%) spinoff will report their fourth-quarter results after Thursday's market close. Conference calls for both companies will follow later that evening. 

Both stocks are trading well below last year's highs. Baidu and iQiyi have plunged 40% and 53% since last year's springtime peaks. A strong financial report this week can help these former dot-com darlings claw their way back into the market's favor.

Check out the latest Baidu and iQiyi earnings call transcripts.

An iQiyi private theater.

Image source: iQiyi.

Earning a turnaround

Baidu's guidance back in October was calling for revenue to climb 15% to 20% in the fourth quarter. China's weakening economy has analysts now settling for a mere 14% in top-line growth. This is shaping up to be Baidu's slowest quarterly growth in nearly two years, but things aren't as bad as the reported results would make it seem. Baidu has been selling off some of its non-core businesses lately, and its guidance adjusted for those asset sales would be calling for 20% to 26% in revenue growth.

Wall Street sees earnings per share sliding to $1.78 for the quarter, down from $2.15 a year earlier. Net income has been expanding lately as Baidu doubles down on its high-margin core businesses, but China's faltering economy and Baidu's own new growth initiatives could be weighing on bottom-line results. The silver lining is that Baidu has beaten analyst profit targets by a double-digit-percentage basis every single quarter over the past year.

iQiyi is growing a lot faster than Baidu. The $943.5 million to $982.8 million it was targeting in revenue four months ago represents a 43% to 49% increase from the prior year's fourth quarter. Analysts are perched at the high end of that range.

The bottom line is another story. iQiyi's video-streaming platform is growing in popularity, but it's still years away from profitability, and Wall Street's bracing for another big deficit. iQiyi has posted larger losses than expected in its brief tenure as a public company.

A strong report by one or both companies can push the stocks higher, but investors will also be looking for signs of improvement. If Baidu can make progress beyond paid search, and if iQiyi can gain momentum with its premium subscriptions, it would go a long way toward making investors overlook any near-term financial hiccups. 

Baidu and iQiyi are at different points in their growth cycles. Baidu has become a contrarian play, falling out of favor with growth investors and now a compelling value play, with its earnings multiple in the teens. iQiyi has more of the racing stripes that growth investors like to see, given its heady growth rate and its compelling niche, but it's in the wrong place at the wrong time as investors steer clear of Chinese growth stocks. They're both cheap investments, but a rough quarter could make them even cheaper.