Amazon (AMZN) Q4 Earnings Crush Estimates, Revenues Up Y/Y
Zacks Investment Research | Jan 30, 2020 09:54PM ET
Amazon.com (NASDAQ:AMZN) reported fourth-quarter 2019 earnings of $6.47 per share, beating the Zacks Consensus Estimate by 62.6%. Further, the figure surged 7.1% from the year-ago quarter.
Net sales of $87.437 billion comfortably surpassed the Zacks Consensus Estimate of $85.996 billion and came well above management’s guided range of $80 billion and $86.5 billion. Further, the figure improved 21% on a year-over-year basis.
North America revenues (61.4% of sales) improved 22% from the year-ago quarter to $53.67 billion. International revenues (27.2% of sales) climbed 14.3% year over year to $23.81 billion. Amazon Web Services (AWS) revenues (11.4% of sales) surged 34% year over year to $9.95 billion.
Year-over-year top-line growth was primarily driven by solid momentum across Prime on account of strong performance of Prime ultra-fast delivery services and expanding Prime Video original content. Further, the company’s record-breaking holiday sales drove the top line.
Additionally, strengthening AWS services and smart home products offerings contributed to the fourth-quarter results.
Following the better-than-expected fourth-quarter results, shares of the company have surged 11.4% in the pre-market trading.
Further, Amazon has returned 15.1% over a year, outperforming the Amazon.com, Inc. Quote
Expanding AWS Portfolio: A Key Catalyst
AWS that witnessed significant improvement in the top line growth, continued to gain momentum across customers during the fourth quarter owing to expanding services portfolio.
The company made AWS Outposts — fully managed and configurable compute and storage racks, generally available to customers. Further, it announced AWS Wavelength — to offer low latency to customers. Notably, the new service is a combination of AWS compute and storage services, and cutting edge 5G networks.
Furthermore, it announced several other services like — AWS Fargate for Amazon Elastic Kubernetes Service, AWS Data Exchange and Amazon Managed (Apache (NYSE:APA)) Cassandra Service, to name a few, during the reported quarter.
The company also introduced six new Amazon SageMaker capabilities and new analytics capabilities among others.
Additionally, Amazon announced a new type of AWS infrastructure deployment — AWS Local Zones. Notably, the first was launched in Los Angeles in the fourth quarter.
We note that all these strong endeavors helped Amazon to win a number of customers during the reported quarter including ProSiebenSat.1 Media, Western Union, Klarna, Old Mutual Limited, Seattle Seahawks, FINRA CAT, Cerner (NASDAQ:CERN), Best Western Hotels & Resorts and BP (LON:BP).
Alexa & Smart Devices Gaining Traction
Get The News You Want
Amazon continued to enhance the skills and features of Alexa during the reported quarter. Features like medication reminders, prescription refills and utility bills payment were added to Alexa capabilities, which in turn enriched user experience.
Further, the company also partnered with Buzzfeed and added thousands of Buzzfeed Tasty’s famous quick-play social videos to Echo Show.
Additionally, Amazon made content from Spotify (NYSE:SPOT) Free, Spotify Podcasts, Apple (NASDAQ:AAPL) Podcasts, SiriusXM’s On Demand library and Tubi TV accessible on Alexa.
Advancing Alexa features with increasing number of devices compatible with Alexa remains a key positive.
Apart from Alexa, the company banked on Fire TV, which has now more than 40 million active users globally. The company launched the latest version of its Fire HD 10 tablet in the fourth quarter. Further, it expanded Fire TV Edition Smart TV offerings by introducing Fire TV Edition Smart TV in India in partnership with Onida.
Additionally, it rolled out Fire HD 10 Kids Edition, which strengthened its portfolio of smart devices for kids. It also introduced Kindle Kids Edition and Echo Glow.
Further, the company strengthened presence in the global home security space by launching Ring Alarm in the U.K. Also, it rolled out all-new Indoor Cam and Stick Up Cam in several countries like Canada, New Zealand, France, Germany, Italy, Australia, the U.K. and Spain.
Quarter Details
Product sales (57.8% of sales) increased 13.1% year over year to $50.542 billion. Service sales (42.2% of sales) surged 33.3% from the year-ago quarter to $36.895 billion.
Operating expenses were $83.558 billion, up 21.8% from the year-ago quarter. As percentage of revenues, the figure expanded 80 bps on a year-over-year basis to 95.6%.
Cost of sales, fulfillment, marketing, technology & content and general & administrative improved 20.5%, 21.6%, 25.7%, 27% and 26.4%, respectively, on a year-over-year basis.
Other operating expenses were down 24.4% from the year-ago quarter.
Operating income increased 2.5% from the year-ago quarter to $3.9 billion. However, operating margin contracted 80 bps from the year-ago quarter to 4.4%.
Operating income for AWS came in $2.6 billion, up 18% year over year. However, the same for North America declined 15.6% from the prior-year quarter to $1.9 billion.
Further, International segment reported a loss of $617 million, narrower from the year-ago quarter’s loss of $642 million.
Guidance
For first-quarter 2020, Amazon expects net sales between $69 billion and $73 billion. The figure is anticipated to grow in the range of 16-22% on a year-over-year basis. The Zacks Consensus Estimate for net sales is pegged at $71.34 billion.
Management projects a favorable foreign exchange impact of approximately 5 bps.
Operating income is expected between $3 billion and $4.2 billion compared with $4.4 billion in first-quarter 2019.
Zacks Rank & Stocks to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Retail-Wholesale sector are Zumiez Inc. (NASDAQ:ZUMZ) , Boot Barn Holdings, Inc. (NYSE:BOOT) and Booking Holdings Inc. (NASDAQ:BKNG) . While Zumiez sports a Zacks Rank #1 (Strong Buy), Boot Barn and Booking Holdings carry a Zacks Rank #2 (Buy). You can see Zacks Investment Research