Goodnight Amazon: World’s Most Overhyped Retailer Misses Top and Bottom Line
by Zero Hedge - January 27th, 2011 4:07 pm
Courtesy of Tyler Durden
All one can say is oops. That margin compression sure does suck:
- Q4 EPS USD 0.91 vs. Exp. USD 0.88
- Q4 net sales USD 12.95bln vs. Exp. USD 13.03bln
- Net sales are expected to be between $9.1 billion and $9.9 billion, or to grow between 28% and 39% compared with first quarter 2010
- Operating income is expected to be between $260 million and $385 million
We have yet to see snow being blamed for the After Hour stock collapse
Full release:
Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its fourth quarter ended December 31, 2010.
Operating cash flow increased 6% to $3.50 billion for the trailing twelve months, compared with $3.29billion for the trailing twelve months ended December 31, 2009. Free cash flow decreased 14% to $2.52 billion for the trailing twelve months, compared with $2.92 billion for the trailing twelve months ended December 31, 2009.
Common shares outstanding plus shares underlying stock-based awards totaled 465 million on December 31, 2010, compared with 461 million a year ago.
Net sales increased 36% to $12.95 billion in the fourth quarter, compared with $9.52 billion in fourth quarter 2009. Excluding the $139 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 37% compared with fourth quarter 2009.
Operating income was $474 million in the fourth quarter, compared with $476 million in fourth quarter 2009. The unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was $18 million.
Net income increased 8% to $416 million in the fourth quarter, or $0.91 per diluted share, compared with net income of $384 million, or $0.85 per diluted share, in fourth quarter 2009.
"Thanks to our customers, we achieved two big milestones," said Jeff Bezos, founder and CEO of Amazon.com. "We had our first $10 billion quarter, and after selling millions of third-generation Kindles with the new Pearl e-ink display during the quarter, Kindle books have now overtaken paperback books as the most popular format on Amazon.com. Last July we announced that Kindle books had passed hardcovers and predicted that Kindle would surpass paperbacks in the second quarter of this year, so this milestone has come even sooner than we expected – and it’s on top of continued growth in paperback sales."
Full Year 2010
Net sales increased 40% to…
Facebook
Twitter
LinkedIn 
del.icio.us
DiggWHAT TO EXPECT THIS EARNINGS SEASON
by ilene - January 12th, 2011 3:39 pm
Courtesy of CULLEN ROCHE of The Pragmatic Capitalist
Another earnings season is right around the bend and it’s shaping up to be very similar to the last 6 that we’ve seen. In short, cost cuts have created very lean balance sheets and corporations are leveraging up these lean balance sheets to generate respectable and “better than expected” bottom line growth. The result is an environment that continues to be unappreciated by the majority of investors.
The largest single cost input for most corporations is labor. During this recession we’ve experienced a near unprecedented decline in unit labor costs. As I mentioned yesterday, this massive cost cut is causing extraordinary pain on Main Street, but is actually helping to generate healthy margins for Wall Street. Although the cost cutting appears to have troughed in the last few quarters labor costs remain very low by historical standards. Rising input costs have started to put pressure on balance sheets, however, on the whole we should see fairly stable margins as long as unit labor costs remain low.
Revenues have been unspectacular in recent quarters, but low single digit domestic growth combined with double digit growth from Asia is helping to drive S&P 500 revenues per share in the right direction. So, we’re seeing continued cost cuts and relatively good revenue growth.
What does that mean? It means nice fat margin expansion. Although margins are still off their all-time highs they are fast approaching those levels. I would expect to see some stagnation in margins in the coming quarters as revenues continue to tick higher and costs continue to move north, however, with margins at record highs we can expect to see continued profit expansion.
What does it all add up to? It likely means we’re in for another quarter of “better than expected” earnings. The deeply negative sentiment and solid bottom line growth has created an investment environment that is ripe for outperformance. This is best reflected in my Expectation Ratio which has now forecast very strong earnings trends since Q2 2009. Based on the recent reading of 1.45 we can be quite confident that the state of corporate America remains quite strong.
HOW GOVERNMENT AUSTERITY CRUSHED CISCO’S EARNINGS
by ilene - November 11th, 2010 9:08 pm
HOW GOVERNMENT AUSTERITY CRUSHED CISCO’S EARNINGS
Courtesy of The Pragmatic Capitalist
This is a VERY interesting development in the corporate
**Cisco’sKeyTakeaways. (1) Cisco reporting notable weaknessinthe Public/Gov’t vertical, in which the company cited weakness particularly in the U.S. with a rapid change (deceleration) in State/Local Gov’t spending dynamics. Total public vertical accounted for ~22% of Cisco’s total product orders; total global orders up only 6% yr/yr vs. +23% yr/yr in the prior quarter. Within this, Cisco did report that it saw mid-teens/stable growth in the U.S. Federal vertical.
This quarter’s weakness was largely the result of declines in state & local
“The level of complacency around this issue is alarming. Most assume, as last week’s Buttonwood panel did, that the federal government will simply come to the rescue of the states without appreciating the immensity of the cumulative state-budget gaps. I expect multiple municipal defaults to trigger indiscriminate selling, which will prompt a federal response. Solutions attempted in piecemeal fashion, as we’ve seen thus far, would amount to constantly putting out recurring fires.
Rather than waiting for more federal intervention, states need to make their own hard decisions and not kick the can down the road. How will taxpayers from fiscally conservative states like Texas or Nebraska feel about bailing out threadbare Illinois or California? Let’s hope we never have to find out.”
Perhaps even more interesting in recent days is the action in the muni market, which has been priced for perfection:
[click on chart to enlarge]
CORPORATE AMERICA REMAINS STRONG
by ilene - November 11th, 2010 8:50 pm
CORPORATE AMERICA REMAINS STRONG
Courtesy of The Pragmatic Capitalist
If there has been one undeniably bullish trend in the last 18 months it has been the strong
- 72% of companies have topped EPS estimates.
- 60% have topped revenue estimates
- Just 19% missed EPS estimates.
- Sales are up 9.8% year over year.
- EPS growth is 32% year over yar
Of course, the cost cuts have come at a cost as millions of Americans remain out of work. Thus far domestic revenues have not sustained a level that has resulted in a substantial pick-up in hiring. But corporations have made up for the less than stellar top line growth by boosting margins. Margins are currently approaching their 2007 peaks, but likely have some room for expansion. It will be interesting to see how QE2 and the impact of rising input costs influences this picture. At first blush, the impact does not appear to be widespread, however, we’ll have a better understanding of the Q4 earnings picture in the coming months when pre-announcements begin. For now, the margin story is intact. At risk, of course, is the labor force in the case that margins begin to turn. For now it looks like the combination of strong international sales and weak domestic sales will be enough to help labor markets slowly continue to heal. In a fluid and low visibility environment, however, this could change given the numerous exogenous risks.
(Figure 1)
The revenue story has been better than expected, however, is far from v-shaped. Revenues per share remain well off their all-time highs despite a strong rebound in bottom line growth. Quarter over quarter revenues per…
Optimist CEO Surprises
by ilene - November 8th, 2010 9:31 am
Optimistic CEO Upside Surprises
By Barry Ritholtz – The Big Picture
It turns out its not just the wealthy who are feeling more optimistic. According to a Bloomberg analysis, more companies are raising earnings forecasts versus those who are cutting them. The gap between the two is as large as its been since Bloomberg began tracking the data.
More U.S. executives than ever are increasing earnings forecasts compared with those lowering them, helped by almost $2 trillion of Federal Reserve spending and a recovery in the global economy.
EBay, UPS, and 196 other companies raised profit estimates above analysts’ projections versus 130 firms that cut them. This is the biggest gap since Bloomberg began tracking the data in 1999.
Companies are raising the outlook for U.S. profits at the same time the Fed is trying to prevent deflation and reduce unemployment by purchasing an additional $600 billion in Treasuries. The last time executives were this optimistic, stocks climbed 39% over the next 3 1/2 years, data compiled by Bloomberg show . . .
More via The Big Picture.
Currency Wars: Debase, Default, Deny!
by ilene - October 29th, 2010 3:18 am
Currency Wars: Debase, Default, Deny!
Courtesy of Gordon T Long of Tipping Points
In September 2008 the US came to a fork in the road. The Public Policy decision to not seize the banks, to not place them in bankruptcy court with the government acting as the Debtor-in-Possession (DIP), to not split them up by selling off the assets to successful and solvent entities, set the world on the path to global currency wars.
By lowering interest rates and effectively guaranteeing a weak dollar through undisciplined fiscal policy, the US ignited an almost riskless global US$ Carry Trade and triggered an uncontrolled Currency War with the mercantilist, export driven Asian economies. We are now debasing the US dollar with reckless spending and money printing with the policies of Quantitative Easing (QE) and the expectations of QE II. Both are nothing more than effectively defaulting on our obligations to sound money policy and a “strong US$”. Meanwhile with a straight face we deny that this is our intention.
It’s called debase, default and deny.
Though prior to the 2008 financial crisis our largest banks had become casino like speculators with public money lacking in fiduciary responsibility, our elected officials bailed them out. Our leadership placed America and the world unknowingly (knowingly?) on a preordained destructive path because it was politically expedient and the easiest way out of a difficult predicament. By kicking the can down the road our political leadership, like the banks, avoided their fiduciary responsibility. Similar to a parent wanting to be liked and a friend to their children they avoided the difficult discipline that is required at certain critical moments in life. The discipline to make America swallow a needed pill. The discipline to ask Americans to accept a period of intense adjustment. A period that by now would be starting to show signs of success versus the abyss we now find ourselves staring into. A future that is now significantly worse and with potentially fatal pain still to come.
Unemployed Americans, the casualties of the financial crisis wrought by the banks, witness the same banks declaring record earnings while these banks refuse to lend. When the banks once more are caught with their fingers in the cookie jar with falsified robo-signing mortgage title fraud, they again look for the compliant parent to look the other way. Meanwhile the US debt levels and spending associated with protecting these failed…
Looking More Like a Top Than a Bottom: ETF and Stock Market Outlook
by ilene - October 26th, 2010 2:13 am
Get a Free Special Report from Wall Street Sector Selector
Looking More Like a Top Than a Bottom: ETF and Stock Market Outlook
Daily ETF and Stock Market Outlook from John Nnyaradi’s Wall Street Sector Selector
Instratrader Indicators:
Red Flag: We Expect Lower Prices Ahead
Daily Technical Sentiment Indicators: Neutral
Short Term Trend: Neutral
Today major indexes saw yet another failed rally at major resistance in spite of all the euphoria over the weekend’s G20 meeting communiqué that was widely seen as a license for the United States to continue trashing its currency and so support “risk on” assets.
As everyone knows by now, a declining dollar has meant a rising stock and commodity market, but today the dollar declined and the equities markets were unable to hold onto meaningful gains.
It increasingly appears that the major factor keeping the market afloat is the anticipated Federal Reserve quantitative easing at its meeting next week with a secondary factor being the notion that the Republicans will reclaim at least the House of Representatives in next week’s election.
It also increasingly appears that both of these events very likely have already been discounted by the market and that market participants could be “selling on the news,” as so often happens.
Overall, this looks more like a top than a bottom when you add up declining breadth and participation by individual stocks, overly bullish investor euphoria and a market that appears to be more sustained by government intervention and support than fundamentals and improving sales and earnings.
The next week will be pivotal on both a technical and fundamental basis. Wall Street Sector Selector remains in the ‘red flag’ mode, expecting lower prices ahead.
Disclosure: No positions mentioned. Wall Street Sector Selector holds various inverse ETF positions and positions can change at any time.
Sure Thing?!
by ilene - September 29th, 2010 1:23 am
Sure Thing?!
Courtesy of Mish
Last week, David Tepper, a billionaire hedge fund titan and president of Appaloosa Management remarked on CNBC …
Two things are happening. It’s that easy sometimes. Either the economy is going to get better by itself, in the next 3 months and what assets are going to do well? You can guess what assets will do well – stocks are going to do well, bonds won’t do so well, gold won’t do as well. OR The economy is not going to pick up in the next three months and the Fed is going to come in with QE. Right? Then what’s going to do well? Everything! In the near term – Everything!
Video
Earnings vs. Share Prices
One might not be able to argue with Tepper’s past performance, but one sure can argue with his current logic. Stocks do not necessarily go up because earnings go up. Stocks rise or fall primarily based on sentiment.
Right now, sentiment is so bullish and earnings estimates so lofty there is room for hefty earnings expansion that falls short or estimates. Buying stocks that miss wildly optimistic earnings estimates is not likely to work out well.
Furthermore, even if earnings do come in on target, there is no historic guarantee that stock prices follow. For example, on March 31, 1973 the S& P was at 111.52 with trailing earnings of $6.80. Seven years later, on March 31, 1980 the S&P was at 102.09 with trailing earnings of $15.27.
Thus, over a span of seven years, earning rose 125% while stock prices fell 8.5%!
What happened? The PE ratio on the S&P fell from 16.40 to 6.68, that’s what.
Moreover, those were real earnings then. Now, corporations hide garbage in SIVs with the blessing of the Fed and analysts cite pro-forma earnings that throw out "one-time" charges that occur with increasing regularity.
Thus, anyone who says stock prices will go up because earnings go up, does not understand history. This does not make Tepper wrong, but it does make his argument fallacious.
What About Quantitative Easing?
Tepper also argues that everything will be good if the Fed falls back on quantitative easing. Really?
The Cleveland Fed has a series of nice charts on Japan’s Quantitative Easing Policy
Japan’s Quantitative Easing vs. Price Inflation
Japan’s Quantitative Easing in Trillions of Yen
After a series
…
The Ghosts of Earnings Past
by ilene - September 21st, 2010 5:10 pm
The Ghosts of Earnings Past
Courtesy of Joshua M Brown, The Reformed Broker
Mark Twain tells us that history doesn’t repeat itself, it rhymes. When it comes to investor behavior going into earnings season, I beg to differ – it is repeating itself even now.
There is a pattern in place that you may want to familiarize yourself with as history has just repeated itself six quarters in a row. The pattern has been a run up in stocks at the beginning of earnings season’s opening month followed by the almost inevitable denouement as hearts are broken and focus is diverted elsewhere.
In each of the last six quarters, the Dow Jones was up on average seven of the first ten days of the first reporting month (Jan, Apr, Jul, Oct). Each of these rallies ended up succumbing to selling, even during quarters with high percentage beat rates. This action is both a commentary on our Twitter-addled attention spans and a classic embodiment of a Wall Street law so old that Hammurabi himself may have written it — Buy on the rumor, sell on the news.
For a reference point, take a look at last quarter’s earnings season (above) which kicked off with a bang in early July. All of a sudden, consumer confidence data began overshadowing anything coming from Corporate America – on Friday, July 16th, we were looking at a brutal 250 point sell-off of the Dow Industrials, wiping out any enthusiasm from upbeat calls. We would resume the rally for a time, only to give it all back as the drumbeat of reports winnowed away.
You can also look at the first quarterly earnings season of 2010 and see the same pattern. We were rockin’ and rollin’ throughout the month of April as each headline read "better than expected". By early May, however, news from our European cousins began to overshadow these upbeat profit reports. On May 6th, the Euro fears had flooded over the transom and we were treated to the infamous Flash Crash.
Will this coming earnings season repeat (or even rhyme) with the last six? We may already be on that track as stocks have begun to breakout of the much-vaunted trading range you’ve heard so much about. The nominal reasons? The NBER has (officially) declared us out…
Market Still Deluding Itself That It Can Escape The Inevitable Dénouement
by ilene - September 13th, 2010 9:09 pm
Market Still Deluding Itself That It Can Escape The Inevitable Dénouement
Courtesy of John Mauldin, Outside the Box
One of my favorite analysts is Albert Edwards of Societe Generale in London. Acerbic, witty and brilliant. Emphasis on brilliant. The fact that he is a Doppelganger for James Montier (who long time readers are well acquainted with) is a coincidence (or he would say vice versa). I only kind of have permission to forward this note to you, but better to ask forgiveness… So, this week he is our Outside the Box. And a short but good one he is.
I am in Amsterdam and it is late, but deadlines have no time line. Tomorrow more work on the book. It is getting close to the end. Most books are finished when the authors quit in disgust. How many edits can you do? I am close.
I wonder late at night, with maybe a few too many glasses of wine, why I feel like a book is so much more than an e-letter. Really? The last ten years of what I have written are on the archives. Good (ok, sometimes really good) is there. But some are an embarrassment. What was I thinking?
But somehow in my Old World brain, a book is more than a weekly letter. It is somehow more permanent than an “online” letter. Which may be archived forever. The book is “paper” and may be around for a few years. But the online version is here for a long time.
I know that is stupid. Really I do. But what is a 61 year old mind to do? A strange world we live in.
It is really time to hit the send button. More than you know! The conversation tonight has been too deep!
Your trying to figure out the purpose of life analyst,
John Mauldin
Market still deluding itself that it can escape the inevitable dénouement
By Albert Edwards
The current situation reminds me of mid 2007. Investors then were content to stick their heads into very deep sand and ignore the fact that The Great Unwind had clearly begun. But in August and September 2007, even though the wheels were clearly falling off the global economy, the S&P still managed to rally 15%! The recent reaction to data suggests the market is in a similar…
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(
