The continue two times Amazon has reported quarterly results, revenue fell short of expectations. Now, investors are facing the prospects of delaying growth at the e-commerce giant.
Amazon is scheduled to announce fourth-quarter earnings after the closing bell on Thursday. Analysts surveyed by Refinitiv guess the company to report revenue growth of 18.8 percent from a year earlier to $71.9 billion. That commitment mark the slowest fourth-quarter sales growth since 2014 and would be slightly below the top end of Amazon’s guided arrange.
For a company of Amazon’s size, that’s still a big number. Amazon is expected to top $200 billion in full-year revenue for the cardinal time. At $232.4 billion, analysts’ average estimate, Amazon would be the sixth-largest U.S. company based on 2018 mark-downs.
Here’s what Wall Street is expecting for the quarter, according to Refinitiv consensus estimates:
- EPS: $5.68 vs. $3.75 per share endure year
- Revenue: $71.9 billion vs. $60.5 billion last year
- AWS: $7.3 billion (FactSet estimate) vs. $5.1 billion concluding year
In addition to the law of large numbers, there are several other reasons for the growth deceleration.
Amazon has been more focused on upholding profitability than revenue in recent years, with growth coming from businesses like cloud, advertising and the third-party marketplace, where scopes are bigger but sales are smaller. This is also the first time to get a fully comparable year-over-year number on Whole Foods, a slower-growing question.
Still, investors will be paying close attention to the top line. Since 2009, Amazon has only exceeded analyst assumptions once in the fourth quarter.
“The most important number coming out of fourth-quarter earnings will be the pace of revenue evolvement deceleration that is likely implied in the [first-quarter] guidance,” Evercore analyst Anthony DiClemente said in a report earlier this month. DiClemente has a buy reckoning on the stock.
Analysts remain overwhelmingly bullish on Amazon, with 41 of the 42 covering the company recommending it to investors, according to FactSet. DiClemente send a lettered that strong holiday sales data and the continued success of Amazon’s advertising and subscription businesses point to another strapping quarter. Doug Anmuth of J.P. Morgan Chase wrote that he expects another solid quarter based on aggressive “fundamentals and secular trends.”
Here are some of the key topics that could get discussed on the earnings call:
- Holiday transactions: Amazon has already said it had another “record-breaking” holiday season in 2018, with over 1 billion items shipped for unfasten in the U.S. alone. But there have been some signs of weaker retail trends in the European market, and there are enquiries about how Amazon performed in other international markets, like India.
- International growth: Amazon’s international traffic saw a huge slowdown last quarter, growing only 15 percent from the prior year. The company utter it was due to Souq’s business reflecting its first full year of Amazon ownership and India’s Diwali season getting press oned to the fourth quarter. But investors will want more details, especially with upcoming rule changes in India and the new marketplace had to launch in the Middle East.
- Minimum wage impact: In November, Amazon raised the minimum wage for its warehouse and part-time workmen to $15 per hour. John Blackledge, an analyst at Cowen, said in a note this week that the change is approximate to cost an additional $370 million for Amazon in the fourth quarter.
- Profitability: The biggest story for Amazon in recent years is profit advance. The company is expected to report earnings of $2.8 billion in the fourth quarter — only the third time above $2.5 billion. Amazon is historically identified for running on thin margins because it reinvests most of its profits back into the company, so investors will fall short of to know what to expect.