JD.com, Inc. JD is set to report fourth-quarter 2014 results on Mar 3. Last quarter, the company posted a 140.0% positive earnings surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
JD.com is the largest online direct sales company in China in terms of transaction volume with a market share of 45%, according to its IPO filing. The company’s third-quarter 2014 earnings of 2 cents surpassed the Zacks Consensus Estimate. Also, revenues of RMB29.0 billion (US$4.7 billion) surged 61% from the year-ago period driven by consistent growth in its e-Commerce business. Additionally, solid growth in gross merchandise volume and active customer accounts aided revenues.
Net loss was RMB164.4 million versus RMB75.0 million in the year-ago quarter. The increase was due to amortization of intangible assets resulting from assets and business acquisitions related to the Tencent strategic partnership.
The company’s continuous efforts to develop new products are likely to have a positive effect on the fourth-quarter results. Moreover, the company continues to gain market share and has significant growth potential in the mobile space over the long term, in our view. In the third quarter, the company’s mobile orders grew more than five times from the year-ago quarter. However, the heavy expenditure incurred to support its e-Commerce business could impact bottom line in the to-be-reported quarter.
Earnings Whispers
Our proven model does not conclusively show that JD.com will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 7 cents. Hence, the difference is 0.00%.
Zacks Rank: JD.com’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
You could consider the following stocks with a positive Earnings ESP and a Zacks Rank #1, 2 or 3:
Superior Industries International, Inc. SUP, with an Earnings ESP of +6.67% and a Zacks Rank #1 (Strong Buy).
Douglas Dynamics, Inc. PLOW, with an Earnings ESP of +13.33% and a Zacks Rank #1.
TRI Pointe Homes, Inc. TPH, with an Earnings ESP of +8.00% and a Zacks Rank #1.
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