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Strong result, Modest Guidance – The Motley Fool

Online retailer and cloud computing veteran Amazon.com (NASDAQ: AMZN) reported the third quarter results after closing the closing date on…

Online retailer and cloud computing veteran Amazon.com (NASDAQ: AMZN) reported the third quarter results after closing the closing date on Thursday. The company sailed past its own guidelines across the board, but the forward-looking guidance for the holiday quarter could have been more ambitious. Amazon stocks fell as much as 9.5% lower in after-trade before recovering to a 8% decline at the end of the expanded trading session.

Here is a closer look at Amazon’s results and the season’s guide number.

Image Source: Amazon.com.

With the figures

In the third quarter, Amazon’s net sales increased by 30% the year before to land 56.6 billion dollars. Operating profit multiplied many times over, from $ 347 million to $ 372 million. In the bottom line, net profit increased 1

1 times to $ 5.75 per diluted share, up from USD 256 million over the previous year.

Management’s guidelines for the quarter had focused on top line sales of approximately $ 55.8 billion and business revenue close to $ 1.9 billion.

North American retail increased 35% to $ 34.3 billion. International e-commerce saw an increase of 13% to stop $ 15.5 billion. Cloud data services under the Amazon Web Services (AWS) banner delivered 46% revenue growth and a total of $ 6.7 billion in net sales. Segment-based operating income was evenly distributed between North American e-commerce and AWS at about $ 2 billion, while the international division was affected by a loss of $ 385 million.

Amazone’s long-term goal is to “optimize free cash flow.” For this purpose, the third quarter released free cash flow of $ 6.06 billion, 442% above $ 1.11 billion in the same period of 2017.

Future

For the next quarter – the important holiday period when retailers dreams can be made or crushed – Amazon issues the following guidance:

  • Net sales should land close to $ 69.5 billion, about 15% over the fourth quarter of 2017.
  • The operating profit should at least match the year’s earnings for the period is $ 2.1 billion and may rise so high as $ 3.6 billion.

These figures include the operating costs that occur when Amazon raises its minimum wages at $ 15 per hour on November 1 and includes 250,000 employees in the United States and the United Kingdom. Operating margins were found at 6.2% in the third quarter, an increase of 5.6% in the second quarter report and possibly the richest treatment in Amazon history. Turning the midpoint for the fourth quarter will decrease this margin to something like 4.1%, still conveniently above the 3.5% margin seen a year earlier.

It should be noted that 15% annual turnover growth would be the lowest reading on that line since the end of 2014 and one of the worst impressions in the last decade. So if you were surprised that Amazon’s shares crash despite a respectable slate of the third quarter results, it’s your answer – A 15% sales weight for the holiday does not affect many Amazon investors, especially when they’re pairing with faster profit margins.

John Mackey, CEO of Whole Foods Market, a subsidiary of Amazonas, is a member of The Motley Fool’s Board. Anders Bylund owns shares in Amazon. The Motley Fool owns and recommends Amazon. Motley Fool has a policy of disclosure.


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