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Can Vipshop Holdings (VIPS) Pull a Surprise in Q2 Earnings?

Zacks

Vipshop Holdings Limited VIPS is slated to report second-quarter 2017 results on Aug 16, after the closing bell. This online discount retailer’s earnings have missed the Zacks Consensus Estimate in two out of the trailing four-quarters. This translates to an average negative surprise of 0.41%.

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

Which Way are Estimates Treading?

A look into estimate revisions give us an idea of what analysts are thinking about the company right before earnings release. The Zacks Consensus Estimate for the second quarter as well as for fiscal 2017 has declined by a penny to 14 cents and 66 cents respectively, over the past 30 days. Further, analysts polled by Zacks expect revenues of $2.49 billion for the said quarter and $10.4 billion for 2017.


What Does the Zacks Model Unveil?

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.

Vipshop has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 14 cents. The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult.

Vipshop Holdings Limited Price, Consensus and EPS Surprise

Factors Influencing the Quarter

Vipshop has been struggling with higher promotional activity, primarily in its retail outlets and higher mix of lower-margin products. These have been negatively impacting the company’s margins. Additionally, macroeconomic slowdown in China and increasing competition in the retail space remain as concerns. The headwinds are also well reflected in the share price performance of the company. Shares of Vipshop went down 7.7% over the past six months while the broader Computer and Technology sector gained 10.5%.

Despite a difficult macroeconomic environment, Vipshop has been delivering improved top-line results in the past few quarters. This was primarily driven by the addition of new customers. The company has also been witnessing the addition of younger and more Internet- and mobile-savvy shoppers to its customer base. Vipshop plans to target these expanding demographics, in addition to offering products tailored for shoppers in various age groups. The company will also focus on delivering more personalized products and services to customers. We remain hopeful that such efforts would aid Vipshop’s performance in the forthcoming periods and facilitate overcoming industry related challenges.

Do Computer and Technology Stocks Interest You? Check These

Investors may also consider better-ranked stocks from the same sector such as Oracle Corporation ORCL, Intel Corporation INTC and HP Inc. HPQ, all carrying a Zacks Rank #2.

Oracle Corporation has an average positive earnings surprise of 3.8% over the past four quarters. It has a long-term earnings growth rate of 10.3%.

Intel Corporation has an average positive earnings surprise of 5.6% over the past four quarters. It has a long-term earnings growth rate of 8.4%.

HP has an average positive earnings surprise of 3% over the past four quarters. It has a long-term earnings growth rate of 2.9%.

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