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What Led to JD.com’s Negative EPS in Q1 2018?

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Aug. 14 2018, Updated 9:01 a.m. ET

What led to the negative earnings for Q1 2018?

This part will focus on JD.com’s (JD) latest quarterly EPS performance. The company’s EPS declined by 23% YoY to 0.7 renminbi ($0.11) in the first quarter of 2018. The decline was due to the operating expenses offsetting the impact of revenue and gross profit growth for the period.

We discussed revenue growth in the previous part. Gross profit grew by 31%. However, the 39% growth in operating expenses led to a 99% decline in the operating income. The rise in operating expenses was due to the company’s R&D talent and technology infrastructure investment. Net interest income grew by 74% for the quarter. The company posted negative EPS and net income for the quarter.

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How do EPS of other online retailers look?

Amazon (AMZN) posted EPS of $3.3 and $5.1 in the first and second quarters of 2018, respectively. eBay (EBAY) had EPS of $0.5 in the first and second quarters of 2018. Walmart (WMT) had EPS of $1.1 for the quarter ended April 30. Alibaba Group Holding Limited (BABA) had EPS of 5.7 renminbi for the quarter ended March 31, 2018.

Consensus Q2 2018 EPS estimates

In the last 16 quarters, JD.com has missed consensus estimates in six quarters. The stock price shed 5% on May 8 when it announced first-quarter results. The company’s consensus EPS estimate is 0.7 renminbi for the second quarter of 2018. The guidance is almost the same as the company’s EPS for the second quarter of 2017.

It will be interesting to observe how close the actual financial results come to the consensus estimates.

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