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Amazon.com (AMZN) Q1 Earnings: Is it Poised to Top Estimates?
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Amazon.com (AMZN - Free Report) will report first-quarter 2017 results on Apr 27 after the bell. Let’s take a look at how the company is placed ahead of the announcement.
According to our model, stocks with a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) have a higher chances of beating estimates when they also have a positive ESP. Therefore, in Amazon’s case, its Zacks Rank #3 and an Earnings ESP of +10.68% seems to indicate a positive surprise this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Amazon’s earnings surprise history has been impressive with the company beating estimates in three of the last four quarters with an average beat of 25.7%. In the last one year, the stock outperformed the Zacks Internet - Commerce industry. It gained 43.4% compared with the industry’s gain of 40%.
Q4 Highlights
Amazon’s fourth-quarter 2016 earnings beat the Zacks Consensus Estimate but missed on revenues. Though the highest-margin Amazon Web Services (AWS) business was up 9.4% sequentially and a massive 47% year over year, its revenue share was around 8%. The North America segment accounted for around 60% of sales, representing a sequential and year-over-year increase of 39% and 22%, respectively. The International segment accounted for 32%, up 31.6% sequentially and 17.9% year over year. This resulted in a positive mix of business and contributed to Amazon’s increased profitability.
Amazon generated fourth quarter net income of $749 million, or 1.7% of sales, compared with $252 million, or 0.8% in the previous quarter and $500 million, or 1.3% of sales in the same quarter last year.
AWS: It's a multi-billion-dollar business and the cash cow for Amazon. It has millions of customers and generates much higher margins than retail. It is the key driver of Amazon’s profitability.
We remain optimistic about the functionality, partner ecosystem and the experience AWS offers and believe this will lead to continued customer wins. If AWS continues to witness the same kind of success, investors can hope for significant growth this time as well.
Prime: Amazon’s retail business remains very hard to beat on price, choice, convenience, you name it. The company has a solid loyalty system in Prime and its FBA strategy, and content addition continues to add selection to Prime memberships. It is focused on building video content, primarily for Prime subscribers because the growth prospects in that market are considerable.
Prime is now widely available and generates increased sales for Amazon. Prime Now, the company’s super-fast delivery service, is expanding rapidly in the U.S. and is now available in more than 30 cities.
IoT: Alexa powered Echo devices are going great guns and help the company sell products and services. Alexa has already been integrated into a host of everyday devices for the digital home and there are agreements for more.
Convenience Store
Amazon has already gone brick-and-mortar with books and is treading the same path with other merchandise as well. The company is targeting the considerably large customer base that still prefers to shop at physical stores.
Amazon Go, the no-queue-checkout-counter grocery store, is going to be a boon for customers who are too worn-out to stand in long lines at physical cash counters or are baffled at complicated self-checking counters. It has the ability to completely shatter the traditional brick-and-mortar convenience stores.
Heavy Investments
Amazon continues to invest heavily in fulfillment centers, AWS, video streaming, offline retail, logistics, India expansion plans and what not. Its global margins are already under pressure and are likely to be so at least for a few years.
Guidance
In the first quarter, management expects revenues to include a 250 bps positive FX impact and come in around $33.25–33.75 billion. Operating income is expected to come in at approximately $250-$900 million.
Bottom Line
If we delve deeper into Amazon’s key investment areas, we see a futuristic approach. Amazon’s long history of execution, growing focus on innovation, technological prowess and huge cash balance, not only give it the flexibility to pursue growth in any area that exhibits true potential but also to create value for investors.
Stocks to Consider
Here are some stocks that you may want to consider as our model shows these have the right combination of elements to post a positive earnings surprise:
Fiserv Inc. , with an Earnings ESP of +0.85% and a Zacks Rank #2.
Western Digital Corporation (WDC - Free Report) with an Earnings ESP of +2.16% and a Zacks Rank #1.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
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Amazon.com (AMZN) Q1 Earnings: Is it Poised to Top Estimates?
Amazon.com (AMZN - Free Report) will report first-quarter 2017 results on Apr 27 after the bell. Let’s take a look at how the company is placed ahead of the announcement.
According to our model, stocks with a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) have a higher chances of beating estimates when they also have a positive ESP. Therefore, in Amazon’s case, its Zacks Rank #3 and an Earnings ESP of +10.68% seems to indicate a positive surprise this quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Amazon’s earnings surprise history has been impressive with the company beating estimates in three of the last four quarters with an average beat of 25.7%. In the last one year, the stock outperformed the Zacks Internet - Commerce industry. It gained 43.4% compared with the industry’s gain of 40%.
Q4 Highlights
Amazon’s fourth-quarter 2016 earnings beat the Zacks Consensus Estimate but missed on revenues. Though the highest-margin Amazon Web Services (AWS) business was up 9.4% sequentially and a massive 47% year over year, its revenue share was around 8%. The North America segment accounted for around 60% of sales, representing a sequential and year-over-year increase of 39% and 22%, respectively. The International segment accounted for 32%, up 31.6% sequentially and 17.9% year over year. This resulted in a positive mix of business and contributed to Amazon’s increased profitability.
Amazon generated fourth quarter net income of $749 million, or 1.7% of sales, compared with $252 million, or 0.8% in the previous quarter and $500 million, or 1.3% of sales in the same quarter last year.
Amazon.com, Inc. Price and EPS Surprise
Amazon.com, Inc. Price and EPS Surprise | Amazon.com, Inc. Quote
What We Are Watching
AWS: It's a multi-billion-dollar business and the cash cow for Amazon. It has millions of customers and generates much higher margins than retail. It is the key driver of Amazon’s profitability.
We remain optimistic about the functionality, partner ecosystem and the experience AWS offers and believe this will lead to continued customer wins. If AWS continues to witness the same kind of success, investors can hope for significant growth this time as well.
Prime: Amazon’s retail business remains very hard to beat on price, choice, convenience, you name it. The company has a solid loyalty system in Prime and its FBA strategy, and content addition continues to add selection to Prime memberships. It is focused on building video content, primarily for Prime subscribers because the growth prospects in that market are considerable.
Prime is now widely available and generates increased sales for Amazon. Prime Now, the company’s super-fast delivery service, is expanding rapidly in the U.S. and is now available in more than 30 cities.
IoT: Alexa powered Echo devices are going great guns and help the company sell products and services. Alexa has already been integrated into a host of everyday devices for the digital home and there are agreements for more.
Convenience Store
Amazon has already gone brick-and-mortar with books and is treading the same path with other merchandise as well. The company is targeting the considerably large customer base that still prefers to shop at physical stores.
Amazon Go, the no-queue-checkout-counter grocery store, is going to be a boon for customers who are too worn-out to stand in long lines at physical cash counters or are baffled at complicated self-checking counters. It has the ability to completely shatter the traditional brick-and-mortar convenience stores.
Heavy Investments
Amazon continues to invest heavily in fulfillment centers, AWS, video streaming, offline retail, logistics, India expansion plans and what not. Its global margins are already under pressure and are likely to be so at least for a few years.
Guidance
In the first quarter, management expects revenues to include a 250 bps positive FX impact and come in around $33.25–33.75 billion. Operating income is expected to come in at approximately $250-$900 million.
Bottom Line
If we delve deeper into Amazon’s key investment areas, we see a futuristic approach. Amazon’s long history of execution, growing focus on innovation, technological prowess and huge cash balance, not only give it the flexibility to pursue growth in any area that exhibits true potential but also to create value for investors.
Stocks to Consider
Here are some stocks that you may want to consider as our model shows these have the right combination of elements to post a positive earnings surprise:
Seagate Technology plc (STX - Free Report) , with an Earnings ESP of +3.77%, and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Fiserv Inc. , with an Earnings ESP of +0.85% and a Zacks Rank #2.
Western Digital Corporation (WDC - Free Report) with an Earnings ESP of +2.16% and a Zacks Rank #1.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>