Baidu (BIDU) Impresses Wall Street With Strong Execution, Margins

Shares of Chinese online search engine Baidu (Nasdaq: BIDU) are up 9% today after reporting better-than-expected second quarter results after the close. The company said its focus on execution, including improving the user and customer experience, drove the strong quarter.

Baidu reported Q2 EPS of $1.71, above the analyst estimate of $1.44. Net income excluding share-based compensation expenses rose 38% from last year. Revenue for the quarter rose 36.7% from last year to $160.7 million and was above the Wall Street consensus of $157.82 million. Baidu sees Q3 revenues of $184-$189 million, up 15% to 18% sequentially, and above the consensus of $182 million.

Wall Street was mostly positive on the quarter.

Goldman Sachs said Baidu's Q2 results exceeded their revenue and margin forecasts. Goldman said they were surprised that TAC climbed to 17% of revenues, but said BIDU still beat on margins. Goldman raises its price target on Baidu from $350 to $376, maintaining their top Conviction Buy List rating on the shares. Goldman is the 2nd highest rated analyst covering the stock, so what they say carries some weight.

Deutsche Bank said Baidu is a "excellent margin story" and said the transition to new ad system Phoenix Nest was faster than expected. They reiterated their Buy rating and $374 price target.

CLSA lifted its price target today to a 'Street High' $430, reiterating their Buy rating.

Susquehanna said large advertisers, margin expansion led to better EPS. The firm raised their price target to $380, reiterating their Positive rating.

Piper Jaffray said the results were strong and the company's less conservative guidance for Q3 is a sign that the overall advertising environment has improved in China. The firm noted operating margin improved significantly in Q209 to 38.5%, vs. 34.4% in Q208 and 24.5% in Q109. The firm raised their price target from $340 to $363, although they maintained their Neutral rating.

UPDATE: Click here to see some highlights from Baidu's Q2 conference call.

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