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JD.com (JD) Beats on Q3 Earnings, Revenues Increase Y/Y

Zacks

JD.com, Inc. (JD) reported third-quarter earnings of 23 cents per share, surpassing the Zacks Consensus Estimate of 10 cents. Revenues were also better than expected.

During the third quarter, the company continued to gain popularity with a number of international brands. The Chinese e-commerce company entered into a partnership with Italian brand, Armani, with the opening of official online stores for two additional Armani product lines, Emporio Armani and Armani Exchange. It also partnered with other leading international brands such as Spectrum Brands, Reckitt Benckiser and Tiger to launch flagship stores.

The company continued to invest in expansion of its fulfillment capability and broadening of its product offerings so as to enhance services offered to sellers on its marketplace platform to ensure long-term growth.

Following strong third-quarter earnings, its shares increased 3.45%. Notably, the company's shares have gained 62.5% year to date, outperforming the industry’s gain of 59.7%.


Revenues

JD.com reported revenues of RMB83.7 billion (US$12.6 billion), beating the Zacks Consensus Estimate of US$12.3 billion and improving 39.2% year over year.

The increase was driven by strong revenues from both online direct sales as well as services.

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 improvement came on the back of demand for home appliance, food and beverage, cosmetics, home furnishing and baby products.

On the other hand, net revenues from services and others increased 46.2% year over year to RMB7.3 billion (US$1.09 billion). The increase was driven by improved brand engagement and better monetization of the company’s platform. It accounted for the remaining 8% of third-quarter sales.

Key Metric

Annual active customer accounts were 266.3 million in the 12-month period ended Sep 30, 2017, reflecting 34% year-over-year growth.

Operating Results

Pro forma gross margin was 15.5%, up 110 bps year over year.

JD.com’s operating expenses of RMB12.5 billion increased 40.7% year over year.

On a GAAP basis, JD.com generated net income of RMB1 billion (US$0.2 million) against net loss of RMB0.5 billion in the year-ago period.

JD.com generated adjusted net income of RMB2.2 billion (US$0.3 million), up 359% from the year-ago quarter.

Balance Sheet

JD.com exited the third quarter with cash, cash equivalents, restricted cash and short-term investments of approximately RMB41.8 billion (US$6.3 billion) compared with RMB46.1 in the prior quarter.

Cash Flow/Share Repurchase

Cash flow from operations was negative RMB244.7 million (US$36.8 million), while free cash flow was negative RMB9 billion (US$1.4 billion) in the third quarter.

4Q Guidance

For the fourth quarter of 2017, management expects net revenues in the range of RMB107-RMB110 billion, reflecting a growth rate between 35% and 39% year over year. This guidance excludes the impact from JD Finance for both 2017 and 2016.

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

Zacks Rank and Stocks to Consider

Currently, JD.com has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA and SMART Global Holdings, Inc. SGH, each sporting a Zacks Rank #1 (Strong Buy), and Applied Materials, Inc. AMAT, carrying 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 NVIDIA Corporation, SMART Global and Applied Materials is projected at 11.2%, 15.0% and 17.1%, respectively.

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