What's In The Offing For Vipshop (VIPS) This Earnings Season?

Vipshop Holdings Limited (NYSE:VIPS) is slated to report third-quarter 2017 results on Nov 20, after the closing bell.

While the company has been gaining from an expanding online consumer base, its performance is challenged due to higher promotional spending. Notably, Vipshop has a mixed record of earnings surprises in the past four quarters. Its earnings missed the Zacks Consensus Estimate in the preceding quarter.

With these aspects in mind, let’s delve deeper on how things are shaping up for Vipshop’s upcoming results.

What to Expect?

The Zacks Consensus Estimate for the third quarter is currently pegged at 15 cents and has been stable in the past 30 days. Estimated earnings are in line with the prior-year figure. Further, analysts polled by Zacks expect revenues of $2,230 million in the said quarter, depicting a growth of 23.9% from the year-ago quarter.

Vipshop Holdings Limited Price, Consensus and EPS Surprise

Factors Influencing the Quarter

Vipshop has been struggling with higher promotional spending to attract customers amid a highly competitive online retail market. This has led to lower gross margin in the past few quarters, thereby affecting the company’s profits. As a result, the company’s shares have underperformed the industry in the past six months. Its shares have lost 39.2% compared with the industry’s decline of 0.4%.

Vipshop expects this trend of increased promotion spending to linger in the third quarter as well, which is a threat to its bottom-line performance. Further, the company’s performance is expected to be hurt by costs associated with investments in improving delivery operations and expanding the internet finance business.

Nonetheless, we expect Vipshop’s top line to benefit from consistent efforts to add customers in the third quarter. The company has been dedicatedly adding strategic units, warehouses and delivery stations to augment customer base. Also, Vipshop has been investing in upgrading its technology to enhance the shopping experience of online customers. While these endeavors bode well for the company’s quarterly results, the aforementioned factors pose significant concerns.

What does the Zacks Model Unveils?

Our proven model does not show that Vipshop is likely to beat 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.

Although Vipshop carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks With Favorable Combination

Here are some companies which, according to our model, have the right combination of elements to deliver earnings beat.

SMART Global Holdings, Inc. (NASDAQ:SGH) has an Earnings ESP of +0.92% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tyler Technologies, Inc. (NYSE:TYL) has an Earnings ESP of +0.13% and a Zacks Rank #2.

Analog Devices, Inc. (NASDAQ:ADI) has an Earnings ESP of +2.39% and a Zacks Rank #2.

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