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When Amazon (NASDAQ: AMZN) Released its third quarter results last week, the company broke with its recent publication standard of a business turnover and a earnings per share exceeding expectations. While the company exceeded its profitability expectations, lower-than-expected revenue and lower than expected forecasts for the significant vacation quarter were enough to trigger a sell-off. The shares were roughed up and lost 14% over the last two trading days.
But has Amazon action really deserved to be so successful? To get a better idea of the company's performance, here are four of the most insightful indicators of the quarter.
Source of the image: Amazon.com.
1. Net sales increased 29%
Amazon's net sales increased 29% to $ 56.6 billion. While this is consistent with management's guidance for a third-quarter revenue figure of between $ 54 and $ 57.5 billion, this figure was lower than analysts' consensus estimates. On average, analysts forecast net sales of $ 57.1 billion for the third quarter.
Moreover, if this was a strong growth in sales, it was a significant deceleration compared to Amazon's 39% annual sales growth in the second quarter.
2. Operating income of $ 3.7 billion
Amazon's operating profit has soared from $ 347 million in the third quarter of 2017 to $ 3.7 billion in the third quarter of 2018. In the third quarter earnings call From Amazon, management has attributed to the strong increase in the company's operating income an increase in revenue and good cost performance, and the rapid growth of its most profitable businesses, namely Amazon Web Services and Advertising. .
3. An increase of 11 times earnings per share
Amazon's strong revenue and operating profit growth translated into a surge in earnings per share. The primary measure of earnings per share increased from $ 0.52 to $ 5.75 in the same period last year.
The company's earnings per share growth is equally evident over a nine-month period. Amazon's earnings per share over the past nine months was $ 14.10, compared to $ 2.39 for the same period a year ago.
4. Amazon expects fourth-quarter revenues to increase by about 15%
As for the future, management has been targeting a business turnover of $ 66.5 to $ 72.5 billion in the fourth quarter, which represents a growth of 10 percent. % to 20% compared to the previous year. This mid-point of the forecast range implies a growth of about 15%.
This growth rate from one year to the next would mark a significant deceleration in the recent growth rate of Amazon's revenues. To this end, Amazon's boards were below those expected by analysts. Prior to Amazon's release of the third quarter results, analysts estimated by consensus that the fourth quarter revenue of the e-commerce and cloud computing company was $ 73.8 billion.
Management was careful to note during the company's third quarter earnings call that the forecast included a forecast of an unfavorable exchange rate of 80 basis points exchange rates as well as the Inclusion of a full quarter of Whole Foods sales in the same quarter of the previous year. , the acquisition having taken place in August of last year. But Brian Olsavsky, Amazon's CFO, also admitted during the conference call that the holiday district was "always a very difficult time to estimate."
Given the sharp rise in Amazon stocks over the last 12 months (equities have increased 39% even after the recent share price decline), the slowdown in the company's revenue may be a good reason to revisit the valuation of Amazon. Nevertheless, investors should keep in mind that earnings per share exceed expectations. Amazon's third-quarter $ 5.75 EPS raised the estimate by consensus analysts of $ 3.14.
John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Daniel Sparks has no position in the mentioned actions. The Motley Fool owns shares and recommends Amazon. Motley Fool has a disclosure policy.
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