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JD.com (JD) Misses Q1 Earnings Estimates, Revenues Beat

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JD.com, Inc. (JD - Free Report) reported first-quarter 2018 earnings of 11 cents per share, missing the Zacks Consensus Estimate by 4 cents.

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 for ensuring long-term growth. As of Mar 31, 2018, the company operated 515 warehouses covering an aggregate gross floor area of approximately 10.9 million square meters in China.

The company's shares have lost 8.1% in a year’s time, underperforming the industry’s gain of 47.2%.

Revenues

JD.com reported revenues of RMB100.1 billion (US$15.96 billion), increasing 33.1% year over year, beating the Zacks Consensus Estimate of US$15.27 billion.

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

In the first quarter, net revenues from online direct sales increased 31% from the prior-year quarter to RMB91.5 billion (US$14.6 billion). It accounted for 91% of the total first-quarter sales. The increase was driven by demand for home appliances, food and beverage, cosmetics, home furnishing and baby products.

On the other hand, net revenues from services and others increased 60% year over year to RMB8.6 billion (US$1.4 billion). The increase was enhanced by improved brand engagement and better monetization of the company’s platform. It accounted for the remaining 9% of first-quarter sales.

Key Metric

Annual Active Customer Accounts— Annual active customer accounts were 301.8 million in the 12-month period ended Mar 31, 2018, reflecting 27.6% year-over-year growth.

Operating Results

Non-GAAP gross margin in the first quarter was 13.9% versus 14.1% in the year-ago quarter.

Fulfillment expenses increased to RMB7.2 billion (US$1.1 billion), up 39.3% year over year. Marketing expenses rose to RMB3.5 billion (US$0.6 billion), up 24.7% from the prior-year quarter. Technology and content expenses increased to RMB2.4 billion (US$0.4 billion), up 87.2% year over year. General and administrative expenses rose to RMB1.1 billion (US$0.2 billion), up 16.5% from the year-ago quarter.

Non-GAAP operating margin from continuing operations was 2.1% versus 2.2% in the year-ago quarter.The higher spending in growth areas including fulfillment centers impacted operating margins.

Non-GAAP EBITDA from continuing operations in the first quarter was RMB1.6 billion (US$0.3 billion) versus RMB1.9 billion in the year-ago quarter.

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

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

Balance Sheet

JD.com exited the first quarter with cash, cash equivalents, restricted cash and short-term investments of approximately RMB37.9 billion (US$6 billion) compared with RMB38.4 billion (US$5.9 billion) in the last reported quarter.

Guidance

For the second quarter of 2018, management expects net revenues to be in the range of RMB120-RMB124 billion, reflecting growth rate between 29% and 33% year over year.

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

Zacks Rank and Stocks to Consider

JD.com has a Zacks Rank #3 (Hold). Some better-ranked stocks in the technology sector are Littelfuse, Inc. (LFUS - Free Report) and Amazon.com, Inc. (AMZN - Free Report) , sporting a Zacks Rank #1 (Strong Buy), while SMC Corporation (SMCAY - Free Report) , 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 Littelfuse, Amazon and SMC Corporation is projected at 12%, 30.2% and 13.7%, respectively.

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