Amazon Earnings on July 29: Will They Crush Expectations Again?

Amazon (NASDAQ:AMZN) is slated to report its second-quarter 2021 results after the market close on Thursday, July 29. An analyst conference call is scheduled for the same day at 5:30 p.m. EDT. 

This will mark the last quarter under which the e-commerce and technology giant’s founder Jeff Bezos was CEO, as longtime company exec Andy Jassy took over the top spot on July 5.

Investors will probably be approaching Amazon’s report with optimism. The company has been sprinting by Wall Street’s revenue and earnings expectations for some time. In the prior four quarters, its earnings beat the analyst consensus estimate by 66% (first quarter of 2021), 95% (fourth quarter of 2020), 67% (third quarter of 2020), and 606% (second quarter of 2020).

In 2021, Amazon stock is up 9% through July 19, lagging the S&P 500‘s 14.3% return. This is nothing for investors to be concerned about, as the stock is simply taking a bit of a breather after its big pandemic-fueled run-up last year, when it gained 76.3% — more than four times the broader market’s 18.4% return.

Put another way, since Jan. 1, 2020, Amazon stock is up 92.1% compared to the S&P 500’s 35.3% return. (A stock chart follows below.)

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Here’s what to watch in the upcoming second-quarter report.

Packages moving on conveyor belts in an Amazon fulfillment center.

An Amazon fulfillment center. Image source: Amazon.

Amazon’s key numbers

Metric Q2 2020 Result Amazon’s Q2 2021 Guidance Amazon’s Projected Change Wall Street’s Q2 2021 Consensus Estimate Wall Street’s Projected Change

Revenue

$88.9 billion

$110 billion to $116 billion

Approximately 24% to 30%

$115.1 billion

29%

Earnings per share (EPS) 

$10.30

N/A

N/A

$12.22

19%

Data sources: Amazon.com and Yahoo! Finance. Note: Amazon does not provide earnings guidance. 

The second quarter is the first time that Amazon laps by a year a quarter that was fully impacted by the pandemic in 2020. In other words, the e-commerce leader is facing a particularly tough year-over-year revenue comparable. In the second quarter of 2020, its revenue jumped 40% year over year, as consumers around the world flocked to online shopping and avoided brick-and-mortar stores, many of which were temporarily closed anyway.

Investors should know that Amazon’s second-quarter revenue will overstate to some degree its underlying performance. Revenue will get a boost from its annual Prime Day, held in June this year. This event is usually held in July (third quarter), though it was held in October (fourth quarter) last year. 

Management expects second-quarter operating income to range from $4.5 billion to $8 billion, compared with $5.8 billion in the year-ago period. This outlook assumes about $1.5 billion of costs related to the pandemic. This guidance range represents operating income declining by as much as 22% to rising by as much as 38% year over year.

For context, in the first quarter, Amazon’s revenue surged 44% year over year to $108.5 billion, exceeding the $104.5 billion the Street had expected as well as its own guidance of $100 billion to $106 billion. Revenue in the North America, international, and Amazon Web Services segments rose 40%, 60%, and 32%, respectively. Net income rocketed 224% to $8.1 billion, which translated to EPS increasing 215% to $15.79. That result demolished the consensus estimate of $9.54. 

AMZN Chart

Data by YCharts.

Third-quarter guidance

The stock market looks ahead, so its reaction to the upcoming earnings release will probably hinge more on the company’s third-quarter outlook than its second-quarter results, relative to Wall Street’s expectations. (Amazon provides guidance for revenue and operating income but not for earnings. However, its operating-income outlook gives investors a rough idea as to what year-over-year percentage change the company expects on the bottom line.)

For the third quarter, analysts are currently modeling for Amazon’s revenue to increase 23% year over year to $118.6 billion and its EPS to rise about 5% to $12.97.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


View more information: https://www.fool.com/investing/2021/07/20/amazon-earnings-on-july-29-will-they-crush-expecta/

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