What to watch when JD.com (JD) reports Q4 earnings

JD.com Inc. (NASDAQ: JD) is slated to report fourth quarter 2019 earnings results on Monday, March 2, before the opening bell. The consensus estimates are for earnings of $0.06 per share on revenue of $23.7 billion.

The quarterly results are expected to benefit from strength in the retail business and the company’s expansion into lower-tier cities through its social e-commerce platform Jingxi. Last quarter, 75% of Jingxi’s new users were from lower-tier cities.

The company has seen strong growth in revenue, aided by growth in users, over the past quarters and this momentum is expected to continue in the fourth quarter as well. JD.com has been taking efforts to improve its customer experience and this is likely to have brought more users to its platform.

Also read: JD.com Q3 2019 Earnings Conference Call Transcript

The company’s efficient logistics and delivery services are also likely to have fueled the results during the quarter. However, higher costs related to investments are likely to pressure the bottom line. Lower margins are another cause of concern.

Last month, reports emerged about JD.com planning to spin off its logistics arm through an IPO in the second half of the year that would value the company at around $30 billion. It is expected that as a stand-alone entity, JD Logistics would perform better. Separating the capital-intensive business unit might improve the company’s overall cash position and enhance shareholder value. Updates on this area will be worth watching.  

In the third quarter of 2019, JD.com beat revenue and earnings estimates. Net revenues increased 28.7% to RMB134.8 billion, or $18.9 billion. Adjusted net income per ADS was RMB2.08 ($0.29).

For the fourth quarter of 2019, net revenues are expected to grow 21-25% to a range between RMB163 billion and RMB168 billion compared to the prior-year period. 

Shares of JD.com have gained 17% in the past three months. The stock has a strong Buy rating and an average price target of $47.08.

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