By Danielle Kucera - Apr 27, 2012 6:22 AM GMT+0700
Amazon.com Inc. (AMZN), the world’s largest Internet retailer, beat analysts’ first-quarter revenue and earnings estimates, led by demand for Kindle devices and e- commerce services for outside vendors.
The shares surged 15 percent after the report. Net income was $130 million, or 28 cents a share, compared with $201 million, or 44 cents, a year earlier, the company said today in a statement. Sales rose 34 percent to $13.2 billion. Analysts on average estimated earnings of 7 cents on sales of $12.9 billion, according to data compiled by Bloomberg.
An Amazon.com Inc. Kindle Fire tablet computer sits on display at a Super Target store in Denver. Photographer: Matthew Staver/Bloomberg
April 26 (Bloomberg) -- Bloomberg's Emily Chang and Jon Erlichman report that Amazon.com Inc., the world’s largest Internet retailer, beat analysts’ first-quarter revenue and earnings estimates, led by demand for Kindle devices and a jump in sales for outside vendors through its website. They speak on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)
April 26 (Bloomberg) -- Mark Harding, an analyst at JMP Securities, talks about Amazon.com Inc.'s first-quarter performance and business strategy. The largest Internet retailer beat analysts’ first-quarter revenue and earnings estimates, led by demand for Kindle devices and a jump in sales for outside vendors through its website. Harding speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)
Amazon.co.uk. Marston Gate 'Fulfillment Center,' in Ridgmont. Photographer: Chris Ratcliffe/Bloomberg
Chief Executive Officer Jeff Bezos is looking to add customers by pouring money into new versions of the Kindle and warehouses that are equipped to send out products faster. In the quarter when it was introduced last November, the Kindle Fire tablet rocketed to No. 2 in the market behind Apple Inc.’s iPad, according to IDC, and it remains the best-selling item on Amazon’s website, the company said today.
“It was above expectations, both top and bottom line,” Kerry Rice, a San Francisco-based analyst at Needham & Co., said in an interview.
Income from operations was $192 million in the first quarter, Seattle-based Amazon said. Analysts on average had projected $99.4 million in operating profit. Third-party unit sales represented 39 percent of the total and grew 60 percent from a year earlier, Amazon said.
Shares Soar
The company’s shares soared as high as $225.80 following the report. They had climbed less than 1 percent to $195.99 at the close in New York, and have gained 13 percent so far this year.
Amazon trades at about 141 times trailing 12-month earnings, compared with an average of about 53 for similar companies, data compiled by Bloomberg show.
This is the first quarter in three that Amazon reported higher revenue than analysts were predicting, data compiled by Bloomberg shows.
“First solid top and bottom line beat in quite a while, when some investors were expecting a miss on one or both,” said Colin Sebastian, an analyst at Robert W. Baird & Co. in San Francisco, who has an “outperform” rating on the company’s shares. “If Amazon can ultimately drive higher margins this year on continued strong revenue growth, then we could see further upside in shares.”
Amazon’s operating margin, a measure of profitability, was 1.46 percent in the first quarter, according to data compiled by Bloomberg. Margin for all of 2011 was 1.79 percent, the lowest for any year since 2001.
Second Quarter
Second-quarter operating income will range from a loss of $260 million to a gain of $40 million, the company said. Analysts in a Bloomberg survey were projecting operating income of $184 million. Sales in the current period will be $11.9 billion to $13.3 billion, Amazon said, compared with an estimate of $12.8 billion.
Bezos spent about $4.6 billion on Amazon’s warehouses last year, part of a series of investments that sent operating expenses up 44 percent in 2011 and sliced margins by 2.3 percentage points. The company will build 13 more distribution centers in 2012, Chief Financial Officer Thomas Szkutak said on a conference call today.
To bolster profitability, the company has been adding more third-party sellers, which generate higher margins, to its website. Amazon collects a commission, usually about 10 percent, on any item sold by an outside vendor. All of that money goes to the bottom line. Amazon also collects fees if the partner elects to fulfill through its chain of warehouses, according to Mercent Corp., a consulting firm that helps retailers improve online sales.
Video Offerings
Amazon is focusing on building out the video offerings available on its website and the Kindle Fire, Szkutak said. Amazon announced the availability of the Amazon Instant Video app for Sony Corp.’s PlayStation 3 earlier this year, the first video-game console that offers the software.
Sales of digital media increased 19 percent to $4.7 billion, Amazon said.
“Underlying user growth trends remain strong,” Douglas Anmuth, an analyst at JPMorgan Chase & Co. (JPM) in New York, wrote in a research note this week. “We project margin to improve in the back half of the year.”
To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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