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Alibaba Group (BABA) to Report Q4 Earnings: What's in Store?

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Alibaba Group (BABA - Free Report) is set to report fourth-quarter fiscal 2017 results on May 18. Last quarter, the Chinese e-Commerce giant delivered a positive earnings surprise of 28.24%.

The surprise history has been good in Alarm.Com’s case. The company surpassed estimates in each of the trailing four quarters with an average four-quarter positive surprise of 40.56%.

For the last one year, shares of Alibaba Grouphave been steadily treading higher. The stock returned 51.7% compared with the Zacks categorized Electronic Commerce industry’s gain of 43.2%.

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

Factors to Consider

Alibaba’s third-quarter fiscal 2017 earnings of $1.09 per share exceeded the Zacks Consensus Estimate of 585 cents. Solid growth in its core e-commerce business and growing cloud computing services led to better-than-expected results. Management expects these factors to continue driving results for the upcoming quarter.

Revenues also increased sequentially as well as year over year. The increase was driven by continued revenue growth in China’s commerce retail business and the consolidation of newly acquired businesses (namely Youku Tudou and Lazada).

The Chinese e-Commerce company, which operates as a platform for third-party sellers, neither sells goods directly to merchants nor holds inventory. Alibaba Group’s strong market position in China, uninterrupted growth in mobile business, unfazed improvement in commerce retail business and improving gross merchandise value should boost fiscal fourth-quarter earnings.

Additionally, Alibaba is expected to continue witnessing an increase in monetization rates. The company is building its online marketing inventory on both mobile and PC. Also, due to higher monetization rate, the company’s profits are expected to increase.

However, the company has been making huge investments in varied growth initiatives. This could impact profits to some extent in the near term. Also, macro headwinds and increasing competition could dampen the upcoming results.

Earnings Whispers

Our proven model does not conclusively show that Alibaba Groupwill beat on earnings this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 49 cents. Hence, the difference is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Alibaba Group has a Zacks Rank #3 which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

You can also consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank.

Applied Materials (AMAT - Free Report) , with an Earnings ESP of +1.32% and a Zacks Rank #2.

Wal-Mart Stores, Inc. (WMT - Free Report) , with an Earnings ESP of +1.04% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank  stocks here.

Eagle Materials Inc. (EXP - Free Report) , with an Earnings ESP of +1.16% and a Zacks Rank #2.

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