Will International Expansion Aid JD.com (JD) in Q2 Earnings?
JD.com, Inc. JD will report second-quarter 2018 results on Aug 16. In the first quarter, the company delivered a negative earnings surprise of 26.67%.
The surprise history has been decent in JD.com’s case. The company surpassed estimates in two of the trailing four quarters, with an average positive surprise of 20.97%.
We observe that the company's shares have lost 19.1% in a year’s time against its industry’s rally of 45%.
Let's see how things are shaping up for this announcement.
Strong Growth in E-Commerce Business
In the first quarter, net revenues from online direct sales increased 31% from the prior-year quarter to RMB91.5 billion (US$14.6 billion). It accounted for 91% of the total first-quarter sales. The upsurge was driven by demand for home appliances, food and beverage, cosmetics, home furnishing and baby products. The company continues to invest in order to expand its fulfillment capability and broaden product offerings for enhancing the e-commerce business.
International Expansion to Boost Top Line
JD.com has been focusing on both developing and maturing e-commerce markets outside China. In doing so, the company has been investing in relatively nascent and growing markets.
Recently, JD.Com has partnered with Alphabet’s division Google. The partnership will allow the e-commerce company to list its products on Google’s shopping site, which will help it to expand customer reach. Further, these products will be sold in Europe and the United States, allowing JD.Com to expand its market size beyond China. The deal will expand Google’s presence in the e-commerce market of China and Southeast Asia. This augurs well for the company’s global expansion and top-line growth.
Partnerships to Aid Growth
During the first quarter, JD.com continued to gain popularity with a number of international brands. Recently, the company partnered with two well-known Chinese retail brands to pursue “Boundaryless Retail Solutions” and provide customers with omni-channel shopping experiences. It will provide integrated logistics and targeted marketing solutions to help the brands improve operating efficiency and enhance customer experience. We expect these moves to contribute to JD.com’s revenue expansion in the to-be-reported quarter.
What Our Model Suggests
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if these have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
JD.com has a Zacks Rank #3 and an Earnings ESP of -8.33%, a combination that does not suggest that the company is likely to beat estimates this time around.
JD.com, Inc. Price and EPS Surprise
JD.com, Inc. Price and EPS Surprise | JD.com, Inc. Quote
Stocks to Consider
We see a likely earnings beat for each of the following companies.
Avnet, Inc. AVT has an Earnings ESP of +0.63% and a Zacks Rank #2.
Semtech Corporation SMTC has an Earnings ESP of +0.53% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cisco Systems, Inc. CSCO has an Earnings ESP of +0.07% and a Zacks Rank #3.
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