Amazon Earnings Yield Mixed Results With Revenue Smash, Tepid Guidance

Amazon Earnings Yield Mixed Results With Revenue Smash, Tepid Guidance

To put that in perspective, Amazon spent more on shipping alone this year than Starbucks, another Seattle mainstay, reported in revenue for all of 2018.

Amazon stock fell nearly 50 points from its closing price of $1,718 on fears of reduced margins from sales in India and increased shipping costs in the US.

Its fourth-quarter profit was just below the earnings the company recorded for the entire year in 2017.

Historical context. The company has beaten analysts' earnings-per-share estimates five of the last eight fourth-quarter reports, but it has beaten sales estimates only once, a year ago. Amazon shares are up about 14 per cent this year on investor optimism that the company can maintain growth and profitability, and closed at US$1,718.73 before the results were released. Sales at Amazon Web Services, the top seller of cloud-computing services, climbed 45 per cent to US$7.43 billion.

This time past year, sales were $5.1bn and operating income was $1.35bn.

Amazon's "other" business segment - consisting mainly of its fast-growing advertising business - generated almost $3.8 billion in sales in the quarter, up 97 percent. Additionally, more than 1 billion items ordered by Prime members were shipped for free. Revenue of $72.4 billion also topped expectations for $71.87 billion.

Strength in online sales over the holiday period showed Amazon still has room to grow in its core business and is benefiting from excitement around its new devices, said Ron Josey, an analyst at JMP Securities.

Net income jumped 63 percent to $3 billion for the fourth quarter, ahead of analysts' estimates.

Last April, Amazon disclosed that it had 100 million Prime subscribers worldwide, revealing its membership base for the first time. Its market cap, more than $840bn as of Thursday afternoon, is the largest of any publicly traded company in the world. Amazon in October pledged to pay all of its warehouse employees at least US$15 an hour, while eliminating some bonuses and stock awards.

Amazon delivered mostly good news on the earnings front, beating Wall Street's expectations for sales and earnings - offset by lower-than-expected guidance for the first quarter.

But Saunders said sales growth appears to have slowed as Amazon matured, raising questions about its future path. For the full year, EPS is expected to rise 335% year over year to $19.86 per share, while full-year revenue of $232.37 billion would represent a 30.6% increase year over year.

Bezos pointed to the Amazon-branded Echo speakers that are at the heart of the new strategy.

Company executives said they are looking beyond the website when it comes to being a player in the digital ad market dominated by Google and Facebook, and is even dabbling with video ads.

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