Amazon is reporting third quarter earnings today after market close.We’ll be covering the news live starting around 4PM ET, and tuning into the company’s earnings call at 5.
Until then, here’s a preview of what to expect.
Barclays analyst Douglas Anmuth expects quarterly revenue to come in at $7.40 billion, toward the top end of Amazon’s guidance, and calls the company “one of the top picks in the Internet space.”
Other analysts seem to agree: JP Morgan analyst Imran Khan expects $7.43 billion in revenue, and Merrill Lynch upgraded the stock to “buy” this morning ahead of the earnings report, citing expectations for a very strong fourth quarter.
On the downside, capex is expected to spike this quarter as a result of the company’s building more fulfillment centres, and analysts will be looking for guidance on fulfillment costs moving forward.
It would also be nice to hear some specifics about Kindle unit sales, but Amazon’s never offered those in the past so we’re not holding our breath.
Key consensus estimates:
- Q3 Revenue: $7.35 billion
- GAAP EPS: $0.48
- Pro forma operating income (Barclays estimate): $421 million
Here are expectations from JP Morgan analyst Imran Khan.
- Our estimate is for total revenue growth of 36%. We are modelling $7.43B in 3Q revenue, vs. company guidance of $6.9B – $7.625B, and consensus of $7.37B. 2Q growth was 41% Y/Y. We think revenue of $7.5B or higher would be perceived positively by the Street.
- We’re modelling Reported Operating Profit of $271M, vs. guidance of $210M – $310M. Note that Amazon telegraphed that 3Q would represent the more aggressive point of its current investment cycle, during which it is adding another ~13 fulfillment centres. Our pro forma operating margin estimate is 5.4% (GAAP operating margin of 3.7%), down Y/Y from 6.4% in 3Q’09. We expect $0.44 in GAAP EPS; consensus is $0.48.
- We project gross margin expansion to 23.7%. Our estimate implies ~35 bps of gross margin improvement on a Y/Y basis, though a ~80 bps decline vs. 2Q. A mix shift toward higher-margin items within the EGM segment could help gross margins.
- We’re modelling NA Revenue up 40% ($3.98B), somewhat below 2Q’s 46% Y/Y growth. We expect Media sales to increase 12% (vs. 15% last quarter), and EGM to grow 70% (vs. 76% last quarter).
- We’re modelling Int’l Revenue up 32% ($3.45B), down from 35% growth in 2Q. This is comprised of Media sales up 17% Y/Y (vs. 20% last quarter) and EGM up 54% (vs. 59% last quarter). On a Y/Y basis, FX represents a headwind, though the recent decline in the dollar should boost revenue outlook compared to previous expectations.
And here’s a quick overview of Barclays’ expectations.
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