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Amazon (AMZN) Beats Earnings and Revenue Estimates in Q1
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Amazon.com’s (AMZN - Free Report) fourth-quarter 2016 earnings per share (EPS) of $1.48 surpassed the Zacks Consensus Estimate of $1.03.
Also, revenues of $35.71 billion exceeded the consensus mark of $35.39 billion. The stock was up 1% in response to the higher-than-expected first-quarter earnings. Strong cloud computing sales, higher revenues from advertising and media streaming services also drove results.
In the last one year, the stock outperformed the Zacks Electronic Commerce industry. While the stock returned 44.5%, the industry gained 40.7%.
Though the North America and international segments were down in the last quarter, they improved from the year-ago quarter. Improvements in AWS were drven by operating efficiencies and increased utilization of assets.
Revenues
Amazon reported revenues of $35.71 billion, down 18.4% sequentially but up 22.6% from the year-ago quarter. Quarterly revenues were above the guidance range of $33.25–$33.75 billion.
Both product and service sales were down sequentially but up year over year. Service sales grew a lot stronger than product sales from the year-ago quarter (up 40.2% compared with product sales growth of 15.3%). Revenue distribution between the two was 66%/34%.
Segment Details
The North America segment accounted for around 59% of sales, representing a sequential decrease of 20% but a year-over-year increase of 23.5%.
The International segment accounted for 31%, down 20.8% sequentially but up 15.6% year over year.
The AWS segment was up 3.5% sequentially and a massive 42.7% year over year with revenue share at nearly 10%. AWS is gaining momentum with customers including McDonald’s, Workday, Capital One, Salesforce, GE Oil & Gas, Kellogg’s, Brooks Brothers, Ferrara Candy Company, GPT Group, Hoya Corporation, Lionsgate, Macmillan Publishers India, RWE Czech Republic, and Bart & Associates Inc. Amazon remains the cloud infrastructure leader, well ahead of Microsoft (MSFT - Free Report) , International Business Machines Corporation (IBM - Free Report) and Alphabet (GOOGL - Free Report) .
Gross Margin
Gross margin was up 337 basis points (bps) sequentially and 194 bps year over year to 37.2%.
Sequential variations in gross margin were largely mix-related, although increased investments were also a factor. Growth in AWS had a positive impact on margin. Pricing is also an important factor, given the increase in product categories all over the world and Amazon’s strategy of heavily discounting products and services while building position in any market. Third party sites did better than retail, which was also a positive.
Net income was down 3.3% sequentially but up 41.1% year over year.
Operating Performance
Amazon’s operating expenses of $12.3 billion were down 9.3% sequentially but up 33.5% from the year-ago quarter. Amazon’s heavy investing activities (headcount, fulfillment centers, content, etc) over the past few quarters have been pushing up its costs.
The net result was an operating margin of 2.8%, down 6 bps sequentially and 86 bps from the year-ago quarter. Amazon reported an operating profit of $1 billion compared with $1.3 billion in the previous quarter and $1.1 billion in the year-ago quarter.
Net Income
Amazon generated first-quarter net income of $724 million, or 2% of sales, compared with $749 million, or 1.7% in the previous quarter and $513 million, or 1.8% of sales in the same quarter last year. There were no one-time items in the fourth quarter. Therefore, the GAAP EPS was the same as the pro forma EPS of $1.48 compared with $1.54 in the previous quarter and $1.07 in the year-ago quarter.
Balance Sheet and Cash Flow
Amazon ended the quarter with cash, cash equivalents and marketable securities balance of $21.53 billion, down $4.45 million from the prior quarter.
The company used $1.59 billion of cash from operations, spending $1.86 billion on fixed assets (including internal-use software and website development costs) and $45 million on acquisitions. Principal repayments of capital lease obligations were $832 million in the first quarter.
Guidance
Management provided guidance for the second quarter of 2017. Revenues are expected to include a $720 million or 240 bps negative FX impact and come in around $35.25–37.75 billion. The Zacks Consensus Estimate is pegged at $36.92 billion. Operating income is expected to come in at approximately $425 million–$1.075 billion.
To Conclude
Retail: 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. If Amazon is able to replicate its domestic success internationally, investors could see far more growth. At the moment, international contributes a third of revenues but generates just a fraction of profits.
AWS: Amazon Web Services, on the other hand, is the cash cow for Amazon. The business generates higher margins than retail, so it has a positive impact on 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.
IoT: Amazon has converted the nascent smart home market into a potential area of growth, in a very short time, backed by its Alexa-powered Echo devices. With third-party partnerships, Amazon is making Alexa the central point of connecting IoT devices used in any household. It appears that Echo is well poised to penetrate every stream of business on the back of Amazon’s robust performance.
The company has accelerated signing on third-party device makers so that these companies integrate Amazon’s voice assistant, Alexa, which brings them into the respective eco systems.
Currently, Alexa is equipped with thousands of skills and can connect to any stream of business. We believe that Amazon has just started unfolding what it could do with Alexa.
Amazon.com, Inc. Price, Consensus and EPS Surprise
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
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Amazon (AMZN) Beats Earnings and Revenue Estimates in Q1
Amazon.com’s (AMZN - Free Report) fourth-quarter 2016 earnings per share (EPS) of $1.48 surpassed the Zacks Consensus Estimate of $1.03.
Also, revenues of $35.71 billion exceeded the consensus mark of $35.39 billion. The stock was up 1% in response to the higher-than-expected first-quarter earnings. Strong cloud computing sales, higher revenues from advertising and media streaming services also drove results.
In the last one year, the stock outperformed the Zacks Electronic Commerce industry. While the stock returned 44.5%, the industry gained 40.7%.
Though the North America and international segments were down in the last quarter, they improved from the year-ago quarter. Improvements in AWS were drven by operating efficiencies and increased utilization of assets.
Revenues
Amazon reported revenues of $35.71 billion, down 18.4% sequentially but up 22.6% from the year-ago quarter. Quarterly revenues were above the guidance range of $33.25–$33.75 billion.
Both product and service sales were down sequentially but up year over year. Service sales grew a lot stronger than product sales from the year-ago quarter (up 40.2% compared with product sales growth of 15.3%). Revenue distribution between the two was 66%/34%.
Segment Details
The North America segment accounted for around 59% of sales, representing a sequential decrease of 20% but a year-over-year increase of 23.5%.
The International segment accounted for 31%, down 20.8% sequentially but up 15.6% year over year.
The AWS segment was up 3.5% sequentially and a massive 42.7% year over year with revenue share at nearly 10%. AWS is gaining momentum with customers including McDonald’s, Workday, Capital One, Salesforce, GE Oil & Gas, Kellogg’s, Brooks Brothers, Ferrara Candy Company, GPT Group, Hoya Corporation, Lionsgate, Macmillan Publishers India, RWE Czech Republic, and Bart & Associates Inc. Amazon remains the cloud infrastructure leader, well ahead of Microsoft (MSFT - Free Report) , International Business Machines Corporation (IBM - Free Report) and Alphabet (GOOGL - Free Report) .
Gross Margin
Gross margin was up 337 basis points (bps) sequentially and 194 bps year over year to 37.2%.
Sequential variations in gross margin were largely mix-related, although increased investments were also a factor. Growth in AWS had a positive impact on margin. Pricing is also an important factor, given the increase in product categories all over the world and Amazon’s strategy of heavily discounting products and services while building position in any market. Third party sites did better than retail, which was also a positive.
Net income was down 3.3% sequentially but up 41.1% year over year.
Operating Performance
Amazon’s operating expenses of $12.3 billion were down 9.3% sequentially but up 33.5% from the year-ago quarter. Amazon’s heavy investing activities (headcount, fulfillment centers, content, etc) over the past few quarters have been pushing up its costs.
The net result was an operating margin of 2.8%, down 6 bps sequentially and 86 bps from the year-ago quarter. Amazon reported an operating profit of $1 billion compared with $1.3 billion in the previous quarter and $1.1 billion in the year-ago quarter.
Net Income
Amazon generated first-quarter net income of $724 million, or 2% of sales, compared with $749 million, or 1.7% in the previous quarter and $513 million, or 1.8% of sales in the same quarter last year. There were no one-time items in the fourth quarter. Therefore, the GAAP EPS was the same as the pro forma EPS of $1.48 compared with $1.54 in the previous quarter and $1.07 in the year-ago quarter.
Balance Sheet and Cash Flow
Amazon ended the quarter with cash, cash equivalents and marketable securities balance of $21.53 billion, down $4.45 million from the prior quarter.
The company used $1.59 billion of cash from operations, spending $1.86 billion on fixed assets (including internal-use software and website development costs) and $45 million on acquisitions. Principal repayments of capital lease obligations were $832 million in the first quarter.
Guidance
Management provided guidance for the second quarter of 2017. Revenues are expected to include a $720 million or 240 bps negative FX impact and come in around $35.25–37.75 billion. The Zacks Consensus Estimate is pegged at $36.92 billion. Operating income is expected to come in at approximately $425 million–$1.075 billion.
To Conclude
Retail: 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. If Amazon is able to replicate its domestic success internationally, investors could see far more growth. At the moment, international contributes a third of revenues but generates just a fraction of profits.
AWS: Amazon Web Services, on the other hand, is the cash cow for Amazon. The business generates higher margins than retail, so it has a positive impact on 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.
IoT: Amazon has converted the nascent smart home market into a potential area of growth, in a very short time, backed by its Alexa-powered Echo devices. With third-party partnerships, Amazon is making Alexa the central point of connecting IoT devices used in any household. It appears that Echo is well poised to penetrate every stream of business on the back of Amazon’s robust performance.
The company has accelerated signing on third-party device makers so that these companies integrate Amazon’s voice assistant, Alexa, which brings them into the respective eco systems.
Currently, Alexa is equipped with thousands of skills and can connect to any stream of business. We believe that Amazon has just started unfolding what it could do with Alexa.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon.com, Inc. Price, Consensus and EPS Surprise | Amazon.com, Inc. Quote
ZacksRank
Amazon carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>