Earnings Preview of Alphabet Inc (NASDAQ:GOOGL), Baidu Inc (NASDAQ: BIDU), Amgen Inc (NASDAQ:AMGN) and Amazon.com Inc (NASDAQ:AMZN)

Alphabet Inc

 Alphabet Inc (NASDAQ:GOOGL) the parent company of Google, reported third quarter results today beating analyst expectation. Major drivers were the strength in search and YouTube. Its Google Cloud is also seeing substantial revenue growth.

 

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Third quarter performance (Source: Company Reports)

Alphabet Inc posted an EPS of $9.06 on revenues of $22.45 billion.  For previous year, its EPS was at $7.35 on revenues of $18.68 billion. Management reported that their mobile search and video are powering company’s core advertising business. The group is also positive on their progress of newer businesses in Google and other bets.

Google website sales increases by 23% to $16.09 billion while advertising revenues rose18% to $19.82 billion. Total traffic acquisition costs were 21% of revenues. Traffic acquisition costs to Google Network Members rose to $2.62 billion, 70% of revenues from Google Network Members. The same to distribution partners rose to $1.56 billion, 10% of Google website revenues.

However, the group expects ongoing pressure on gross margin from higher TAC associated with mobile search and with programmatic. During the quarter, Google’s revenues rose to $22.25 billion while “other bets” revenue rose to $197 million on account of Nest, Fiber and Verily.

Alphabet has a “Strong Buy” rating based on 33 analysts’ consensus recommendation at tipranks.com, while the stock has an average price target of $953.75, indicating an upside of 16.7%. The group also announced >$7 billion stock buyback authorized this month.

Amgen Inc.  

 Amgen Inc (NASDAQ:AMGN) reported a 2% rise YoY in revenues to $5.8 billion during the third quarter of 2016. Although the revenue growth was sluggish, the performance beats street estimates of $5.73 billion.

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But, earning growth was at $2.02 billion of $2.68 per diluted share, registering an 8.6% rise on QoQ and 9.8% YoY. On a non-GAAP basis, Amgen’s earnings came at $2.28 billion, which is higher than 9.6% YoY.  Amgen generated $2.5 billion of cash flow in the third quarter with cash and cash equivalents of $37.98 billion. Net product sales were flat in the third quarter.

On the other hand, Company’s top selling Enbrel lost ground slightly from the same quarter with sales of $1.45 billion. The biggest losers were Epogen and Neupogen as sales for the drugs fell 31% and 36% respectively. The cost of R&D fell 12%.

Going forward, Amgen also narrowed its full year 2016 revenue guidance and expects revenues between $22.6 billion – $22.8 billion.  The company increased its full year earning outlook and now projects GAAP EPS of $9.94 to $10.11, up from its earlier range of $9.55 – $9.90. Non GAAP EPS is expected to be in the range of $11.4 to $11.55. Going forward, we need to see the progress of drug on migraines and also cholesterol drug Repatha. The company expects to announce those results in the first quarter of 2017.

Amazon.com Inc

 Amazon.com Inc (NASDAQ:AMZN) posted a third quarter EPS of 52 cents on revenues of $32.71 billion. This fall short of analyst expectation of 78 cents a share on revenues of $32.69 billion.  The company saw $18.87 billion in North America sales during the quarter against expectation of $19.09 billion. Internationals sales were $10.61 billion.

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In the second half of the year, Amazon has increased its investments in its fulfillment centers and video content. Amazon’s revenue outlook for the holiday season also came in slightly below expectations. The company expects fourth quarter sales in the range of $42 billion and $45.5 billion. The company’s cloud computing business, Amazon Web Services (AWS), brought in $3.23 billion in revenue during the quarter. Operating margin for AWS climbed to 31.6%, up from 29.9% in previous quarter. AWS results were strong as revenue grew nearly 55% and this is important as in coming times AWS would be half of Amazon earnings and the big growth driver. The management expects 22% YoY rise in net sales to $43.8 billion and operating incomes around $1.25 billion for Q4CY16.

 

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Ongoing growth in revenues (Source: Company Reports)

 

Baidu Inc

 Baidu Inc (NASDAQ: BIDU) reported 3% YoY rise in monthly active users (MAU) to 660 million for September while mobile maps MAU were 348 million, a rise of 7% YoY. Gross merchandise value (GMV) for transaction services reported 49% YoY rise to RMB 19.4 billion ($2.9 billion). Total revenues for the third quarter 2016 were RMB 18.253 billion ($2.737 billion), a 0.7% decrease from the corresponding period in 2015. Mobile revenues represented 64% of total revenues for the third quarter of 2016 compared with 54% for the corresponding period in 2015.

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However, Online marketing revenues for the third quarter were RMB 16.49 billion ($2.473 billion), down 6.7%. The online marketing customers decreased 15.9% to 524,000 numbers. Revenue per online marketing customer for the third quarter of 2016 was approx. RMB31,300 ($4,694). Up 10.6%. Operating profit grew 11% to RMB2.787 billion ($417.9 million). Transaction services reduced non-GAAP operating margins by 21.4 percentage points and iQiyi further reduced non- GAAP operating margins by 7.7 percentage points for the third quarter of 2016. Net income attributable to Baidu in the third quarter was RMB3.102 billion ($465.2 million), a 9.2% increase from the corresponding period in 2015 while diluted earnings attributable to Baidu per ADS for the third quarter were RMB 8.51 ($1.28). For the fourth quarter of 2016, the company expects revenues in the range of RMB17.840 – RMB18.38 billion ($2.675 – $2.756 billion) representing a 4.6% to 1.7% YoY decrease.

Dick Wei from Credit Suisse downgraded the stock today to “Hold” position. Moreover, BIDU stock has a limited upside of 5.3% based on the average Price Target $184.33 (Source: tipranks.com)

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