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JD.com (JD) Q4 Earnings Miss Estimates, Revenues Improve Y/Y

Zacks Equity Research
Updated

JD.com, Inc. JD reported fourth-quarter earnings of 5 cents per share, missing the Zacks Consensus Estimate of 9 cents.

Earnings were impacted by increasing investments in new business lines including logistics investments, overseas expansion, artificial intelligence and cloud services. Order fulfillment expenses and technology costs increased year over year.

However, its fourth-quarter revenues came in above the Zacks Consensus Estimate of US$16.6 billion.

The company continued to invest in order to expand its fulfillment capability and broaden product offerings to enhance services offered to sellers on its marketplace platform to ensure long-term growth. As of Dec 31, 2017, the company operated 486 warehouses covering an aggregate gross floor area of approximately 10 million square meters in China.

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Following fourth-quarter earnings release on Mar 2, its shares were down 5.2%. Also, the company's shares have gained 44% in a year’s time, underperforming the industry’s of 50.9%.

Revenues

JD.com reported revenues of RMB110.2 billion (US$16.9 billion), increasing 38.7% year over year. The reported figure was above the Zacks Consensus Estimate of US$16.6 billion. The increase was driven by strong revenues from both online direct sales as well as services.

In the fourth quarter, net revenues from online direct sales increased 37.3% from the prior-year quarter to RMB100.1 billion (US$15.4 billion). It accounted for 91% of total third-quarter sales. The improvement was driven by demand for home appliances, food and beverage, cosmetics, home furnishing and baby products.

Meanwhile, net revenues from services and others were up 54.7% year over year to RMB10 billion (US$1.5 billion). The upswing can be attributed to improved brand engagement and better monetization of the company’s platform. It accounted for the remaining 9% of third-quarter sales.

Key Metric

Annual Active Customer Accounts – Annual active customer accounts were 292.5 million in the 12-month period ended Dec 31, 2017, reflecting 29.1% year-over-year growth.

Operating Results

Pro forma gross margin was 12.9%, down 50 bps from the year-ago quarter.

Total operating expenses increased 41% year over year. Non-GAAP operating margin from continuing operations was -0.5% versus 0.7% in the year-ago quarter.

On a GAAP basis, JD.com generated net income of RMB909.2 million (US$139.7 million), down 27.9% from the prior-year quarter.

JD.com generated adjusted net income of RMB419.3 million (US$69.1 million), down 43% from the year-ago quarter.

Balance Sheet

JD.com exited the fourth quarter with cash, cash equivalents, restricted cash and short-term investments of approximately RMB38.4 billion (US$5.9 billion) compared with RMB41.8 billion (US$6.3 billion) in the prior quarter.

Guidance

For the first quarter of 2018, management expects net revenues to be in the range of RMB98-RMB100 billion, reflecting growth rate between 30% and 33% year over year.

This guidance excludes the impact from JD Finance for the 2017 period.

JD.com, Inc. Price, Consensus and EPS Surprise

 

JD.com, Inc. Price, Consensus and EPS Surprise | JD.com, Inc. Quote

Zacks Rank and Stocks to Consider

JD.com has a Zacks Rank #3 (Hold). A few better-ranked stocks in the technology sector are PetMed Express PETS, Teradyne TER and Brady Corporation BRC. While PetMed and Teradyne sport a Zacks Rank #1 (Strong Buy), Brady Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for PetMed, Teradyne and Brady Corporation is projected to be 10%, 12% and 7.5%, respectively.

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