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Amazon.com
Inc. is scheduled to announce its third-quarter earnings after the market closes on Thursday. Here’s what you need to know:
EARNINGS FORECAST: Analysts polled by Thomson Reuters on average expect Amazon to earn $3.14 a share, compared with 52 cents a share a year earlier. The company forecast an operating income range between $1.4 billion and $2.4 billion, compared with $347 million a year earlier.
REVENUE FORECAST: Analysts on average project quarterly revenue of $57.1 billion, up from $43.74 billion a year earlier. Amazon has said it expects sales of between $54 billion and $57.5 billion for the quarter, which includes growth from its acquisition of grocery-store chain Whole Foods. The guidance also includes a negative foreign-exchange impact.
BIG SPENDING: Despite Amazon’s record profitability so far this year—something analysts predict will continue into the third quarter—talk about Amazon’s spending is likely to dominate the company’s third-quarter analyst call. That’s because of some recent developments expected to affect future earnings, but also because Amazon typically spends the most in its third quarter to gear up for the holidays. That may be changing as high-margin streams of revenue from Amazon Web Services and other businesses play a bigger role, as Thursday’s numbers may reveal, allowing Amazon to better engineer profitability.
WAGE INCREASE: Starting Nov. 1, Amazon has said it will raise its minimum wage to $15 an hour.
Morgan Stanley
is projecting that move alone could result in a cost increase of nearly $3 billion next year. Still, “this wage increase is smart strategically,” the analysts said, because it could help limit regulatory interference from politicians while the company’s increasing reliance on robots cushions the cost effect on profits. Amazon is expected to provide more guidance on the results to the bottom line Thursday.
POSTAL RATES: Another potential expense for Amazon is increased postal rates. The company has been under fire from President Trump for its usage of the U.S. Postal Service for deliveries, and the quasi-governmental agency recently said it was increasing rates. Jefferies analysts estimate the increases could cost Amazon $700 million next year and contribute to higher overall spending.
HQ2: Add to the bill HQ2, Amazon’s coming second headquarters. An announcement is expected before the end of the year, and Amazon will start building out a small first-phase of its new campus. Depending where that is, labor may be cheaper than in Seattle, but a host of other factors will come into play on how much the expansion costs. Amazon has said it plans to create as many as 50,000 jobs and invest more than $5 billion over nearly two decades. Of course, some of that is likely to be offset by government incentives.
Write to Laura Stevens at [email protected]
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