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Here's How Lockdowns May Influence Amazon (AMZN) Q1 Earnings

Amazon.com, Inc. AMZN is scheduled to report first-quarter 2020 earnings on Apr 30, after market close. The retail giant’s quarterly earnings may not have consistently surpassed the Zacks Consensus Estimate in the past four quarters, but reported revenues outpaced estimates. In fact, shares of Amazon have gained 24.1% over a year compared to the Zacks Internet - Commerce industry’s rise of 8.6%.

Wall Street Has High Hopes for Amazon in Q1

Amazon, is particularly in focus because of the coronavirus-triggered lockdown, which has given rise to new e-commerce trends in recent months. Since shopping malls and supermarkets across the country have their gates locked, millions have taken to order their groceries and other essentials online. This trend has greatly benefited the Seattle-based retail giant.

While the company has certainly benefited from the rising demand for its online services in the first-quarter 2020, it also had to bear the cost of adapting its business model to social-distancing measures without hampering its operations.

The company has gone on a massive hiring spree since March, in a bid to meet high demand for groceries and other essential products in the wake of the pandemic. The company hired about 100,000 extra workers last month, followed by announcing that it plans to hire 75,000 more by the end of this month. This impressive number of new appointments indicates the sharp surge in online retail that Amazon is trying to meet, thus creating strong tailwinds for the company’s revenues in first-quarter 2020.

Coming to the retail giant’s earnings for the said quarter, one may need to take a look at the many additional expenses incurred by the company because of the novel coronavirus.

First, the retailer prioritized groceries and essential goods over non-essential products during the first quarter, which could have offered the company better profit margins. Of course, this decision may have impacted only partially, since sales in January and February weren’t affected much because of the disease. The social-distancing measures came into place in March.

Second, the company also raised the pay for its frontline workers through April-end ($2 per hour in the United States, £2 per hour in the UK and about €2 per hour in many European Union countries), according to a CNBC report.

Third, the company witnessed disruptions in its supply chain, since some factories in China and elsewhere in the world have their shutters down right now.

Finally, Amazon has also ramped up the frequency and extent of its sanitization and cleaning of work places over the past few months, which is likely to have added to the company’s expenses.

Q1 2020 Earnings and Revenue Expectations

TheZacks Consensus Estimate for Amazon’s first-quarter revenues stands at $73.96 billion, indicating a 23.9% rise from revenues reported for the quarter ended March 2019.

However, the Zacks Consensus Estimate for Amazon’s first-quarter earnings is pegged at $6.31 per share, suggesting an 11% decline from the year-ago quarter’s reported earnings of $7.09.

Finally, Amazon has a Zacks Rank #3 (Hold) and an Earnings ESP of +1.56%. Per our proven model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Our 10-year backtested results show that stocks that have a positive Earnings ESP and a Zacks Rank #3 or better show a positive surprise nearly 70% of the time, and have returned over 28% on average in annual returns. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amazon.com, Inc. Price and EPS Surprise

Amazon.com, Inc. Price and EPS Surprise
Amazon.com, Inc. Price and EPS Surprise

Amazon.com, Inc. price-eps-surprise | Amazon.com, Inc. Quote

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