Will International Expansion Aid JD.com (JD) Q4 Earnings?

JD.com, Inc. (NASDAQ:JD) will report fourth-quarter 2017 results on Mar 2. In the third quarter, the company delivered a positive earnings surprise of 130%.

The surprise history has been impressive in JD.com’s case. The company surpassed estimates in each of the trailing four quarters, with an average positive surprise of 256.3%.

We observe that the company's shares have gained 53.8% in a year’s time, underperforming its industry’s gain of 66%.

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

Strong Growth in E-Commerce Business

In the third quarter, net revenues from online direct sales increased 38.5% year over year to RMB76.5 billion (US$11.5 billion). It accounted for 92% of total third-quarter sales. The increase was driven by demand for home appliances, food and beverage, cosmetics, home furnishing and baby products. The company continues to invest in order to expand its fulfillment capability and broaden product offerings to enhance its e-commerce business.

International Expansion to Boost Top Line

JD.com has been focusing on both developing and maturing e-commerce markets outside China. In doing so, the company has been investing in relatively nascent and growing markets. Recently, in January, the company agreed to invest in Vietnamese e-commerce firm Tiki.vn. The investment will expand JD.com’s presence in Southeast Asia and also fend off further competition from Alibaba (NYSE:BABA) Group and Amazon (NASDAQ:AMZN). These investments will expand revenues in the quarter to be reported.

Partnerships to Aid Growth

During the third quarter, JD.com continued to gain popularity with a number of international brands.The Chinese e-commerce company entered into a partnership with Italian brand, Armani, opening official online stores for two additional Armani product lines. It also partnered with other leading international brands such as Spectrum Brands, Reckitt Benckiser and Tiger to launch flagship stores. We expect these moves to contribute to JD.com’s revenue expansion in the to-be-reported quarter.

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if these have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

JD.com has a Zacks Rank #3 and an Earnings ESP of -41.86%, a combination that does not suggest that the company is likely to beat estimates this time around.

We see a likely earnings beat for each of the following companies.

Veritiv Corporation (NYSE:VRTV) , with an Earnings ESP of +41.03% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Newfield Exploration Company (NYSE:NFX) , with an Earnings ESP of +5.9% and a Zacks Rank #3.

ICU Medical, Inc. (NASDAQ:ICUI) , with an Earnings ESP of +6.12% and a Zacks Rank #2.

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