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JD.com (JD) May Disappoint in Q1 Earnings: Stock to Suffer?

JD.com JD is slated to report first-quarter 2016 results on May 9. Last quarter, the company posted a negative earnings surprise of 855.56%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

JD.com’s fourth-quarter adjusted loss of 86 cents per share was significantly wider than the Zacks Consensus Estimate of a loss of 9 cents. However, revenues of RMB54.6 billion surged 57% year over year. This was mainly attributed to growth in active user accounts and the number of fulfilled orders.

JD.com consistently invests to ensure long-term growth, increase brand awareness, broaden product offerings, enhance services offered to sellers on its marketplace platform and expand fulfillment capability. These should strengthen the company’s position and drive results in the to-be-reported quarter.

JD.com is currently gaining popularity among many international brands like Nike Inc., Apple Inc. and Adidas, primarily because of its good market reputation.

Management expects first-quarter net revenue growth between 45% and 50% on a year-over-year basis.

However, higher operating expenses and increasing competition from Alibaba and other players could weigh on results.

Earnings Whispers

Our proven model does not conclusively show that JD.com will beat estimates 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 a loss of 8 cents. Hence, the difference is 0.00%.

Zacks Rank: JD.com carries a Zacks Rank #5 (Strong Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies which you may consider instead as our model shows they have the right combination of elements to beat on earnings this quarter:

Intrexon Corporation XON, with an Earnings ESP of +17.39% and a Zacks Rank #1. The company is slated to report first-quarter 2016 earnings results on May 10, 2016.

Student Transportation Inc. STB, with an Earnings ESP of +60.00% and a Zacks Rank #1. The company is slated to report third-quarter fiscal 2016 earnings results on May 12, 2016.

Hormel Foods Corporation HRL, with an Earnings ESP of +5.26% and a Zacks Rank #1. The company is slated to report second-quarter fiscal 2016 earnings results on May 18, 2016.

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JD.COM INC-ADR (JD): Free Stock Analysis Report
 
HORMEL FOODS CP (HRL): Free Stock Analysis Report
 
INTREXON CORP (XON): Free Stock Analysis Report
 
STUDENT TRANSPT (STB): Free Stock Analysis Report
 
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