Amazon.com Inc. (NASDAQ:AMZN) is set to report FQ4 2013 earnings after the market closes on Thursday, January 30th. The shift from brick and mortar retail stores to online shopping has been a huge trend over the past 10 years, and it seemed really obvious this year. Retail sales numbers were down and some of the holiday season crowds that we saw in the past were nowhere to be found. Some of it could be blamed on the polar vortex and the extreme weather, but at the end of the day this is all good news for e-commerce websites and Amazon.com is one of the largest. Through December into January, analyst expectations for Amazon's holiday sales have surged. Here's what investors are expecting from Amazon's earnings report on Thursday.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Amazon to report 68c EPS and $26.031B revenue while the current Estimize.com consensus from 70 Buy Side and Independent contributing analysts is 65c EPS and $26.161B revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Amazon to miss the Street on profit but exceed on revenue.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing an average differential between the 2 groups' EPS forecasts.
By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The distribution of estimates published by analysts on the Estimize.com platform range from 19c to 95c EPS and $24.750B to $27.031B in revenues. This quarter we're seeing a large distribution of estimates on profit and a smaller distribution of estimates on revenue.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A larger distribution of estimates signaling less agreement in the market, which could mean more volatility post earnings. This quarter it seems that investors are confident that Amazon increased sales, but disagree about how much money the company had to spend to capture the growth.
For much of the quarter, Wall Street kept its estimate flat while the Estimize consensus responded to the news surrounding holiday sales. This December, brick and mortar retail sales got crushed and online sales were up. UPS had to hire 30,000 more temporary workers than expected to deal with the last minute online shopping surge and packages from Amazon and other e-commerce sites were showing up late. Analysts that contribute to the Estimize consensus revised their profit numbers down and revenue expectations up. Increased sales are expected to drive revenue while increased costs required to keep up with demand should impact the bottom line.
The analyst with the highest estimate confidence rating this quarter is jesseyoungmann who projects 72c EPS and $25.144B in revenue. In the Winter 2014 season jesseyoungmann was rated as the 115th best analyst and is ranked 332nd overall among over 3,650 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, jesseyoungmann is taking the opposite view of the Estimize consensus, expecting Amazon to beat on profit and miss on revenue.
This quarter analysts on the Estimize.com platform are expecting AMZN to miss Wall Street expectations on profit, but exceed on revenue. Analysts are predicting that weak sales at physical stores means more online sales, and the fiasco that happened with UPS will also mean reduced margins for Amazon.
Disclosure: No positions.