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What's in Store for Vipshop (VIPS) Stock in Q1 Earnings?

Vipshop Holdings Limited VIPS is slated to report first-quarter 2017 results on May 15, after the closing bell. The question lingering in investors’ minds is, whether this online discount retailer will be able to post a positive earnings surprise again in the to-be-reported quarter. The company’s earnings have missed the Zacks Consensus Estimate in two of the trailing four-quarter and posted an average miss of 0.5%.

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

What Does the Zacks Model Unveil?

Our proven model does not show that Vipshop is likely to beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Vipshop Holdings Limited Price, Consensus and EPS Surprise

Vipshop Holdings Limited Price, Consensus and EPS Surprise | Vipshop Holdings Limited Quote

Vipshop has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 16 cents. Although the company’s Zacks Rank #3 increases the predictive power of ESP, its Earnings ESP of 0.00% makes surprise prediction difficult.

Factors Influencing the Quarter

We note that Vipshop has been delivering improved top-line results in the past few quarters amid a difficult macro-economic environment. The addition of new customers, primarily the younger and more Internet and mobile-savvy shoppers has fueled revenues. In the final quarter of 2016, revenues increased by 36.5%, mainly attributable to the rise in the numbers of active customers, repeat customers as well as total orders. In fact, its top line has outpaced the Zacks Consensus Estimate in 10 of the past 12 quarters.

Notably, the estimates have been highly stable ahead of the earnings release. The Zacks Consensus Estimate of 16 cents for the first quarter represents a year-over-year growth of 14.3%. Further, analysts polled by Zacks expect revenues of $2,256 million for the said quarter, up 19.5% from the year-ago quarter.

We note that shares of Vipshop have rallied 8.8% in the past six months compared with the Zacks categorized Internet Services – Delivery industry’s gain of 23.2%%. The industry is currently placed at bottom 16% of the Zacks Classified industries (214 out of 256).

 



Though higher promotional activity, primarily in the outlet stores and higher mix of lower-margin products are keeping margins under pressure, the company expects gross margin to remain stable over the coming quarters. Additionally, macroeconomic slowdown in China and increasing competition in the retail space remain concerns.

Furthermore, Vipshop forms part of the Computer and Technology sector that is currently placed at top 38% of the Zacks Classified sectors (6 out of 16). Per the latest Earnings Outlook, the earnings growth for the sector is estimated to improve 16.3% and revenues are expected to grow 6.1% in the first quarter.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Applied Materials, Inc. AMAT has an Earnings ESP of +1.32% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Commvault Systems, Inc. CVLT has an Earnings ESP of +50.00% and a Zacks Rank #3.

Garmin Ltd. GRMN has an Earnings ESP of +2.47% and a Zacks Rank #3.

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Vipshop Holdings Limited (VIPS): Free Stock Analysis Report
 
CommVault Systems, Inc. (CVLT): Free Stock Analysis Report
 
Garmin Ltd. (GRMN): Free Stock Analysis Report
 
Applied Materials, Inc. (AMAT): Free Stock Analysis Report
 
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