Amazon beats Q3 earnings estimates, misses on revenue

Muriel Colon
October 27, 2018

After the e-commerce giant announced lower-than-expected earnings in the third quarter on Thursday night, it wasn't just Amazon's stock that fell.

For the quarter, Amazon reported per-share earnings of $5.75, up from 52 cents a year earlier and easily beating Wall Street's expectations of $3.14, according to Yahoo Finance. Operating income will be US$2.1 billion to US$3.6 billion, Amazon said.

Amazon CEO Jeff Bezos touted the success of the company's business supplies unit in a press release, noting that the segment had achieved $10 billion in annual sales.

Heading into the print, Stifel analyst Scott Devitt has raised his near- and long-term revenue estimates for Amazon's retail, advertising, and AWS businesses and modestly increased his margin forecasts.

Q4 EPS (forecast): The company didn't provide earnings guidance for the holiday period.

Revenue from Amazon's global business, which brings in 27.5 per cent of total sales, was at the heart of the shortfall in results, growth halving to 13.4 per cent compared to the previous quarter.

In similar fashion, Goldman Sachs analyst Heath Terry reiterated his Buy rating for Amazon, saying he is still optimistic the company is in the early innings of several big markets. Shares of No. 2 online ad firm Facebook Inc, which faces questions about flattening usage limiting revenue growth, had fallen 12.5 percent and were trading at 19 times future earnings. In the third quarter a year ago, Amazon pulled in $US43.7 billion in sales. The Street wanted to hear $73.79 billion, but Amazon forecast between $66.5 billion and $72.5 billion.

Internet titans Google and Amazon came under an investor cloud after posting disappointing sales updates, with the search leader also on the defensive for reportedly hushing up sexual misconduct. That division saw sales jump 35% to $US34.3 billion.

"Overall, Amazon's growth trajectory remains solid, including advertising, grocery, pharmacy, and specialty retail, as well as Amazon Business ($10 billion in sales in eight countries) and Amazon Web Services", Telsey Advisory Group analysts said.

Amazon also benefitted from strong sales of its Prime subscription program. It purchased online pharmacy PillPack in June, which followed its US$13.7 billion acquisition of Whole Foods previous year to jump start its grocery business.

The logo of Amazon is seen at the company logistics centre in Boves, France, August 8, 2018. About half of our Diwali sales past year were in Q3.

At 9:56 a.m. EDT the Dow Jones Industrial Average was down 274.85 points, or 1.10 percent, at 24,709.70, the S&P 500 was down 42.12 points, or 1.56 percent, at 2,663.45 and the Nasdaq Composite was down 144.96 points, or 1.98 percent, at 7,173.38.

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