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Amazon shares fall as earnings miss analyst expectations

Jay Greene, The Seattle Times • Jan 31, 2014 at 6:00 PM

SEATTLE (MCT) – Amazon.com shares sank in after-hours trading after the online retail giant reported strong fourth quarter results that nevertheless fell short of analysts' expectations.

For the fourth quarter, Amazon reported a net profit of $239 million, or 51 cents per diluted share, or up 146 percent, on $25.6 billion in sales, up 20 percent from the year-ago period. While Amazon's revenue was in line with expectations, analysts had been expecting net profit of 71 cents a share, according to Zacks Investment Research.

Shareholders had pushed Amazon stock up nearly 5 percent during the day's trading to $403.01 in anticipation of the earnings report, as analysts projected the company's earnings expansion. Even as Amazon's revenue has grown rapidly in recent years, the company has reinvested that cash into the business, building warehouses to get products closer to customers and expanding into new businesses.

Nearly an hour after releasing the results, Amazon's share traded at $369.10, down 8.4 percent.

Three months ago, the company had projected sales between $23.5 billion and $26.5 billion, representing a 10 percent to 25 percent increase for the quarter.

The company also estimated that it would report somewhere between a $500 million operating loss and a $500 million operating profit for the quarter, compared with $405 million in operating profits for the fourth quarter 2012. The company posted a $510 million operating profit, up 26 percent.

Amazon Chief Financial Officer Tom Szkutak said the company hit, and even bested, the results it forecast, even if analysts had expected more.

"We certainly do our best to communicate the results" to Wall Street, Szkutak said in a conference call with reporters after the company released results.

While holiday sales for many retailers were modest, analysts were banking on more robust shopping growth at Amazon. In late September, the company boosted its hiring of temporary holiday warehouse workers by 40 percent, as some retail rivals scaled back. And as the shopping season came to a close, retail analysts said that shoppers spent a disproportionate share of their holiday-shopping money at online sites such as Amazon.

There were few blemishes in Amazon's earnings report. A modest one was that Amazon couldn't handle to the popularity of its Amazon Prime service, which offers customers free two-day shipping of millions of items. The company, which said it has more than 20 million subscribers in the service, noted it couldn't add capacity quickly enough to meet demand and had to limit signups during "peak periods."

Szkutak noted that it was "hard to say" what the opportunity cost of that limited number of Prime subscription signups was.

For the year, Amazon posted net income of $274 million, or 59 cents a diluted share, compared with a $39 million loss, or 9 cents a diluted share, in 2012. Annual revenue climbed 22 percent to $74.5 billion.

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