AMZN Amazon.com Inc

By Laura Stevens 

Amazon.com Inc. is scheduled to announce its fourth-quarter earnings after the market closes on Thursday. Here's what you need to know:

EARNINGS FORECAST: Analysts polled by Thomson Reuters expect Amazon to earn $1.35 per share, compared with unadjusted results of $1 per share a year ago. Full-year earnings are expected to be $4.76, compared with unadjusted earnings of $1.25 per share a year ago. The company forecast operating income of between $0 and $1.25 billion for the quarter, compared with $1.11 billion a year ago.

REVENUE FORECAST: Quarterly revenue of $44.68 billion is forecast by the analysts, compared with $35.75 billion a year ago. Amazon said it expected sales of between $42 billion and $45.5 billion for the quarter. Full-year is expected by analysts to be $137 billion.

WHAT TO WATCH:

--HOLIDAYS: All eyes will be on Amazon's sales over the holidays, which are expected to show solid growth. According to Slice Intelligence, which collects data from email receipts of 4.2 million shoppers, Amazon was a clear winner, commanding an estimated 38% of online sales. E-commerce also grew at a rate faster than total retail spending -- about 20%. But will that growth come at a price due to promotions? If so, Moody's analysts say that it could be a bellwether for the rest of the retail industry and signal lower margins across the board. Morgan Stanley analysts argue that even if the value of products sold on the website increased faster than profits, it's still a core gauge of the health of the online retailer.

--COSTS: And that's where costs come in. In the third quarter, Amazon disappointed some with what was seen as a lackluster forecast for fourth-quarter profit (starting at $0) and big warnings on continued increased spending through at least the end of the year. The company pushed its one- and two-hour Prime Now delivery service as a last-minute option for procrastinators, but the company has said speedy deliveries have caused an uptick in costs. Oppenheimer analysts say they expect the current investment cycle, focused on international expansion, logistics, content and domestic hires, to last for about another year. Analysts will be looking for any clarity on future spending levels.

--TRANSPORTATION: Also playing into increasing costs are Amazon's transportation ambitions. Amazon this week announced it's planning to build its first air hub, following Amazon's recent jump into ocean freight as it begins to handle shipment of goods by ocean to its U.S. warehouses from Chinese merchants selling on its site. But, as United Parcel Service Inc. and FedEx Corp. often point out, it's a costly, difficult and low-margin business to build. Amazon's new air hub alone is expected to cost around $1.5 billion. The company also has been building new warehouses closer to consumers, something that helps cut back on the distance needed to ship a package -- but is expensive. Transportation consultant Satish Jindel warns that as Amazon fashions itself further into a logistics company, investors may start to view it that way -- something that may add pressure to margins.

--POLITICS: Likely to be asked on Thursday's call: How is the relationship with President Donald Trump? Amazon has see-sawed with the new administration in recent weeks, first announcing it was creating 100,000 jobs over the next 18 months in what appeared to be a peace offering to the incoming president, then on Monday saying it was working with lawmakers to counter Mr. Trump's executive order on immigration.

CEO Jeff Bezos and Mr. Trump have had one of the rockier public relationships between the president and a company leader, in part because of the CEO's ownership of the Washington Post. Top of mind for retailers ranging from eBay Inc. to Amazon is a concern about border taxes or trade restrictions, which may disrupt or drive up costs for their businesses.

(END) Dow Jones Newswires

February 02, 2017 08:14 ET (13:14 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.