Vipshop Holdings (VIPS) Q2 Earnings: What's In The Cards?

Vipshop Holdings Limited (NYSE:VIPS) ) is set to report second-quarter 2016 results on Aug 8,after the market closes. Last quarter, this Chinese online lifestyle product retailer posted a negative surprise of 6.67%. In the last four quarters, the company missed estimates in two, posted in-line results in one and topped expectations in one with an average positive surprise 1.86%.

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

VIPSHOP HOLDNGS Price and EPS Surprise

VIPSHOP HOLDNGS Price and EPS Surprise | VIPSHOP HOLDNGS Quote

Factors at Play

Vipshop Holdings ramped up its marketing efforts and started offering substantial discounts in 2015. This helped the company expand and target new users across a wide age group. We expect the trend to continue in the to-be-reported quarter, thereby boosting the company’s top line.

Moreover, the company enhanced its logistics to improve customers’ shopping experience. It also expanded the product assortment at its stores during the first half of 2016, which should aid top-line growth in the to-be-reported quarter.

The financing program for customers launched during the first quarter is expected to boost customer spending. This should help the company increase consumer loyalty and enhance the overall consumer experience, while boosting the average spend per customer. Such an initiative is expected to increase the company’s market share as well as boost revenues in the second quarter.

However, the discounts offered by the company are expected to adversely impact margins. Further, the ongoing macroeconomic slowdown in China and increasing competition in the retail space are headwinds.

Earnings Whispers

Our proven model does not conclusively show that Vipshop Holdings will beat earnings this quarter. 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. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 14 cents per share. Hence, the difference is 0.00%.

Zacks Rank: Vipshop Holdings carries a Zacks Rank #4 (Sell).

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

Stocks to Consider

Here are some computer and technology stocks with a positive Earnings ESP and a favorable Zacks Rank:

Analog Devices (NASDAQ:ADI) with an Earnings ESP of +2.63% and a Zacks Rank #2.

Digital Turbine (NASDAQ:APPS) with an Earnings ESP of +12.50% and a Zacks Rank #3.

Digital Globe (NYSE:DGI) with an Earnings ESP of +9.09% and a Zacks Rank #1.