Amazon Earnings: What to Watch
April 27 2017 - 8:29AM
Dow Jones News
By Laura Stevens
Amazon.com Inc. is scheduled to announce its first-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 $1.12 per share excluding certain items, compared
with unadjusted results of $1.07 per share a year ago. The company
forecast operating income of between $250 million and $900 million,
compared with $1.1 billion a year ago.
REVENUE FORECAST: Quarterly revenue of $35.3 billion is forecast
by the analysts, compared with $29.1 billion a year ago. Amazon
said it expected sales of between $33.25 billion and $35.75 billion
for the quarter.
WHAT TO WATCH:
-- PROFIT: For years, Amazon's revenue growth and investments
have largely come at the expense of profit, but the online retail
giant appeared to exhibit more discipline to preserve its bottom
line in the fourth quarter. Still, the company has entered a period
of heavy investments, something that analysts expect to last at
least into next year. Amazon is creating 130,000 U.S. jobs through
mid-2018 and rapidly expanding its network of warehouses
domestically, something signaling expectations for big growth. But
while sales are again expected to grow at a rapid rate in the first
quarter, Amazon's heavy spending could upend the precarious balance
act to ding profitability.
-- INTERNATIONAL EXPANSION: Amazon is heavily spending on
international expansion, now that it has largely saturated the U.S.
market. Amazon introduced Prime in Mexico in the first quarter and
said last week it is launching a retail business in Australia.
International sales last year were $43.98 billion, up 24% from 2015
and about a third of total revenues. Still, the division posted an
operating loss, and analysts have expressed concern about the high
level of investments made by the company to grow overseas. Expect
updates from executives on initiatives abroad -- especially in
China and India, where the company is fighting for market share
against domestic incumbents.
-- SHIPPING: Another big factor in increased costs is Amazon's
ambition in transportation. In the first quarter, Amazon announced
it is building its first air hub in Kentucky and it is also
planning to add airfreight capacity for Chinese customers. Evidence
is mounting that Amazon is entering the market as an end-to-end
transportation provider (something people familiar with the matter
confirm privately). But will executives shed more light on its
strategy? The notoriously private company may be choosing to stay
mum on the topic in part due to the fact that it still relies
heavily on partners like United Parcel Service Inc.
-- CONTENT: Executives may take the chance to tout their Oscar
nomination for best picture, as well as two wins for "Manchester by
the Sea." With those, Amazon became the first internet company to
win an Academy Award. More important, it may drive more consumers
to subscribe to the company's Prime annual membership program.
Prime subscribers, who pay an annual fee of $99 in the U.S. for
access to videos, free, two-day shipping and a host of other perks,
spend a lot more on average on the retailer's site, according to
analysts. Critical acclaim can't hurt sign ups.
Write to Laura Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
April 27, 2017 08:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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