Amazon Beats Earnings Forecast

With earnings seasons in full swing, many of the United States largest corporations are seeing fluctuations in their stock prices as quarterly results hit the market.  For investors, the question, “will earnings beat the forecast” is always important.  While there are certainly other contributions to stock price fluctuations around earnings, the estimated versus the actual earnings per share has the largest impact.

On Thursday, e-commerce giant Amazon announced its earnings after market close.  For their shareholders, it was a bit of good news as they reported better-than-expected earnings for the second quarter.  In addition, they forecasted much of the same for the third quarter.  In a statement Thursday, Amazon said their third-quarter operating income will be well over $2.0 billion and could be as high as $2.4 billion.  On the other hand, the average analyst estimate, according to Bloomberg data, sits just a touch under $1.3 billion.  In the after-hours news, Amazon also reported revenues that ended at less than analyst expectations; however, it does not appear that the company is concerned due to the large investments in new devices and businesses the company made in recent months.

Breaking it down by the numbers, second-quarter revenue numbers came in at $52.9 billion.  Amazon revised third-quarter sales of $54 billion to $57.5 billion.  Revenue from Amazon Web Services jumped 49% to $6.1 billion.  In the first quarter, Amazon saw similar numbers with a 48% increase. Sales from other businesses – mostly advertising – surged 129% to $2.2 billion, slightly lower than the rate of growth in the first quarter.  In the past year alone, the stock has risen 54.6%.  In the past three years, the value of Amazon’s stock has more than tripled, making it now the second-most valuable public company.  It now appears that Amazon and Apple are going head-to-head to be the first company to reach a market value of $1 trillion.

The biggest performance on the retail side of the business came from the United States.  In that sector, Amazon reported an operating profit of $1.84 billion, more than four times the amount recorded at this time in 2017.  In the rest of the world, Amazon reported an operating loss for its retail business; however, Amazon had much larger losses in that area in the same quarter last year.

One of the largest contributors to the increased earnings for Amazon was third-party transactions. In recent months, independent merchants had more success selling their products on the site.  It appears that the annual Amazon Prime Day firmly contributed to those numbers by pushing customers towards deals from third-party vendors.  Amazon gets commission from those products with little to no inventory holding cost and therefore, earn the revenue with little to no expenses.

In after-hours trading, Amazon shares jumped more than 4% despite a 3% decline drop in price during regular trading hours.

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