Vipshop Holdings Limited VIPS is set to report second-quarter 2015 results on Aug 10. Last quarter, the China-based online lifestyle product retailer posted a positive earnings surprise of 10.00%.
Let’s see how things are shaping up for this announcement.
Factors at Play
Vipshop Holdings has been posting decent results over the past few quarters on the back of higher revenues and solid expense management.
During 2014, Vipshop started revamping mobile application to make it more customer-friendly. This is encouraging and should boost the company's top line in the second quarter as more consumers are using mobile devices for online shopping. Moreover, in the previous quarter, Vipshop tried to improve customers’ shopping experience by expanding its logistics. The company has also expanded the product assortment at its stores during the first quarter which should aid top-line growth in the to-be-reported quarter.
However, the ongoing macroeconomic slowdown in China and increasing competition in the retail scenario may offset these positives. Again, higher investment in warehouse expansion may weigh on margins in the second quarter.
Earnings Whispers
Our proven model does not conclusively show that Vipshop Holdings will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) 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 10 cents per share. Hence, the difference is 0.00%.
Zacks Rank: Vipshop Holdings’ Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 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 Internet service providers with a positive Earnings ESP and a favorable Zacks Rank such as:
A10 Networks Inc. ATEN, with an Earnings ESP of +6.67% and a Zacks Rank #1.
Actua Corporation ACTA, with an Earnings ESP of +2.38% and a Zacks Rank #3.
Amtec Systems Inc. ASYS, with an Earnings ESP of +8.00% and a Zacks Rank #3.
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