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Amazon (AMZN) Q4 Earnings Beat, Sales Up on AWS Strength
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Amazon.com (AMZN - Free Report) reported fourth-quarter 2017 earnings of $3.75 per share, which soared 143.3% year over year. Adjusting for a tax benefit of almost $789 million due to the recent enactment of the U.S. Tax Cuts and Jobs Act of 2017, earnings of $2.16 beat the Zacks Consensus Estimate of $1.85.
Net sales of $60.45 billion comfortably surpassed the Zacks Consensus Estimate of $59.98 billion. The figure surged 38.2% year over year and was toward the high end of the management’s guided range of $56.0-$60.5 billion. After adjusting for foreign exchange, revenues increased 36% year over year.
North America revenues (61.7% of sales) jumped 42.2% from the year-ago quarter to $37.30 billion. International revenues (29.8% of sales) increased 29.2% to almost $14 billion. Amazon Web Services (AWS) revenues surged 44.6% year over year to $5.11 billion, primarily driven by an expanding customer base.
AWS launched a new region in France and a second AWS Region in China during the quarter. The company plans to open 12 more Availability Zones (“AZ”) across four regions (Bahrain, Hong Kong, Sweden, and a second GovCloud Region in the United States) by 2019.
Amazon.com, Inc. Price, Consensus and EPS Surprise
AWS now operates 52 AZ across 18 infrastructure regions globally.
2017 at a Glance
Earnings surged 25.6% to $6.15 per share in 2017. Net sales increased 30.8% to $177.9 billion.
Amazon announced that more paid members joined Prime in 2017 than any previous year — both worldwide and in the United States. Prime Video app is now available on Apple TV in over 100 countries.
Amazon Prime Video launched original content like Breathe in India, as well as Pastewka and Glory is Gone in Germany.
Amazon launched Prime in the Netherlands and Luxembourg and added facility for customers in Belgium to join Prime and shop in Dutch. The company also launched Prime in Singapore.
In 2017, more than five billion items were shipped with Prime worldwide. Fire TV Stick and Echo Dot were the best-selling products across all of Amazon. Customers purchased tens of millions of Echo devices.
Again in 2017, AWS (9% of sales) surged almost 43% to $17.46 billion. Operating income increased 39.4% to $4.33 billion. The company added several enterprise customers including Expedia, Ellucian, DigitalGlobe, Turner, Symantec, Intuit, the National Football League (NFL), Capital One, Cerner, Bristol-Myers Squibb, Honeywell, Experian, FICO, Insitu, LexisNexis, Sysco, Discovery Communications, Dow Jones and Ubisoft.
Amazon added more than 30% to its fulfillment square footage in 2017. Fulfillment by Amazon ("FBA") shipped billions of items for small and medium-sized businesses.
Quarter Details
Product sales (70% of sales) increased 35% year over year to $41.33 billion. Service sales (30% of sales) surged 46% from the year-ago quarter to $19.13 billion.
Operating expenses were $58.32 billion, 37.3% higher than the year-ago quarter. Cost of sales, fulfillment, marketing, technology & content, general & administrative and other operating expenses increased 32.9%, 56.9%, 36.9%, 38.9%, 45.6% and 76.5%, respectively.
As percentage of revenues, operating expenses declined 60 basis points (bps) on a year-over-year basis to 96.5%. Cost of sales and marketing expenses declined 250 bps and 10 bps, respectively. While fulfillment expenses increased 180 bps, technology & content and general & administrative expenses increased 10 bps each.
Operating income jumped 69.5% from the year-ago quarter to $2.13 billion. Operating margin expanded 60 bps from the year-ago quarter to 3.5%.
Segment wise, North America (61.7% of sales) operating income jumped 107.4% from the year-ago quarter to $1.69 billion. AWS operating income surged 46.2% year over year to $1.35 billion. International reported a loss of $919 million.
Cash Flow
Cash flow from operations was $18.43 billion at the end of fourth-quarter 2017 compared with $17.27 billion in the year-ago quarter.
Free cash flow declined $2.16 billion to $8.38 billion in the reported quarter.
Guidance
For the first quarter of 2018, management expects net sales between $47.75 billion and $50.75 billion. The figure is anticipated to grow in the range of 34-42% on a year-over-year basis. Management anticipates a favorable impact of approximately $1.2 billion or 330 bps from foreign exchange rates.
Operating income is expected between $300 million and $1.0 billion compared with $1.0 billion in first-quarter 2017.
The long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected at 10%, 14.9% and 25%, respectively.
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Image: Bigstock
Amazon (AMZN) Q4 Earnings Beat, Sales Up on AWS Strength
Amazon.com (AMZN - Free Report) reported fourth-quarter 2017 earnings of $3.75 per share, which soared 143.3% year over year. Adjusting for a tax benefit of almost $789 million due to the recent enactment of the U.S. Tax Cuts and Jobs Act of 2017, earnings of $2.16 beat the Zacks Consensus Estimate of $1.85.
Net sales of $60.45 billion comfortably surpassed the Zacks Consensus Estimate of $59.98 billion. The figure surged 38.2% year over year and was toward the high end of the management’s guided range of $56.0-$60.5 billion. After adjusting for foreign exchange, revenues increased 36% year over year.
North America revenues (61.7% of sales) jumped 42.2% from the year-ago quarter to $37.30 billion. International revenues (29.8% of sales) increased 29.2% to almost $14 billion. Amazon Web Services (AWS) revenues surged 44.6% year over year to $5.11 billion, primarily driven by an expanding customer base.
AWS launched a new region in France and a second AWS Region in China during the quarter. The company plans to open 12 more Availability Zones (“AZ”) across four regions (Bahrain, Hong Kong, Sweden, and a second GovCloud Region in the United States) by 2019.
Amazon.com, Inc. Price, Consensus and EPS Surprise
Amazon.com, Inc. Price, Consensus and EPS Surprise | Amazon.com, Inc. Quote
AWS now operates 52 AZ across 18 infrastructure regions globally.
2017 at a Glance
Earnings surged 25.6% to $6.15 per share in 2017. Net sales increased 30.8% to $177.9 billion.
Amazon announced that more paid members joined Prime in 2017 than any previous year — both worldwide and in the United States. Prime Video app is now available on Apple TV in over 100 countries.
Amazon Prime Video launched original content like Breathe in India, as well as Pastewka and Glory is Gone in Germany.
Amazon launched Prime in the Netherlands and Luxembourg and added facility for customers in Belgium to join Prime and shop in Dutch. The company also launched Prime in Singapore.
In 2017, more than five billion items were shipped with Prime worldwide. Fire TV Stick and Echo Dot were the best-selling products across all of Amazon. Customers purchased tens of millions of Echo devices.
Again in 2017, AWS (9% of sales) surged almost 43% to $17.46 billion. Operating income increased 39.4% to $4.33 billion. The company added several enterprise customers including Expedia, Ellucian, DigitalGlobe, Turner, Symantec, Intuit, the National Football League (NFL), Capital One, Cerner, Bristol-Myers Squibb, Honeywell, Experian, FICO, Insitu, LexisNexis, Sysco, Discovery Communications, Dow Jones and Ubisoft.
Amazon added more than 30% to its fulfillment square footage in 2017. Fulfillment by Amazon ("FBA") shipped billions of items for small and medium-sized businesses.
Quarter Details
Product sales (70% of sales) increased 35% year over year to $41.33 billion. Service sales (30% of sales) surged 46% from the year-ago quarter to $19.13 billion.
Operating expenses were $58.32 billion, 37.3% higher than the year-ago quarter. Cost of sales, fulfillment, marketing, technology & content, general & administrative and other operating expenses increased 32.9%, 56.9%, 36.9%, 38.9%, 45.6% and 76.5%, respectively.
As percentage of revenues, operating expenses declined 60 basis points (bps) on a year-over-year basis to 96.5%. Cost of sales and marketing expenses declined 250 bps and 10 bps, respectively. While fulfillment expenses increased 180 bps, technology & content and general & administrative expenses increased 10 bps each.
Operating income jumped 69.5% from the year-ago quarter to $2.13 billion. Operating margin expanded 60 bps from the year-ago quarter to 3.5%.
Segment wise, North America (61.7% of sales) operating income jumped 107.4% from the year-ago quarter to $1.69 billion. AWS operating income surged 46.2% year over year to $1.35 billion. International reported a loss of $919 million.
Cash Flow
Cash flow from operations was $18.43 billion at the end of fourth-quarter 2017 compared with $17.27 billion in the year-ago quarter.
Free cash flow declined $2.16 billion to $8.38 billion in the reported quarter.
Guidance
For the first quarter of 2018, management expects net sales between $47.75 billion and $50.75 billion. The figure is anticipated to grow in the range of 34-42% on a year-over-year basis. Management anticipates a favorable impact of approximately $1.2 billion or 330 bps from foreign exchange rates.
Operating income is expected between $300 million and $1.0 billion compared with $1.0 billion in first-quarter 2017.
Zacks Rank & Stocks to Consider
Amazon carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader technology sector are Micron Technology (MU - Free Report) , Lam Research (LRCX - Free Report) and The Trade Desk (TTD - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected at 10%, 14.9% and 25%, respectively.
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
Click here to access these stocks>>