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Amazon (AMZN) to Report Q2 Earnings: What's in the Offing?

Amazon AMZN is scheduled to report second-quarter 2020 results on Jul 30.

The company expects second-quarter net sales between $75 billion and $81 billion. The figure is anticipated to improve in the range of 18-28% on a year-over-year basis.

The Zacks Consensus Estimate for second-quarter net sales is pegged at $81.3 billion, suggesting growth of 28.2% from the prior-year quarter.

Further, the Zacks Consensus Estimate for second-quarter earnings currently stands at $1.75 per share, up 7.4% over the past 30 days.However, the figure suggests a decline of 66.5% from the year-ago reported figure.

The company surpassed the Zacks Consensus Estimate in one of the trailing four quarters and missed the same thrice. It has a trailing four-quarter earnings surprise of 8.71%, on average.

E-commerce Demand, Retail Efforts & Prime: Key Factors to Note

The coronavirus hit-world has been a boon for the online retail market, which has become an integral part of the new normal as people refrain from stepping outside their homes on fears of contracting the deadly virus.

Hence, Amazon has been witnessing overflowing orders amid the ongoing pandemic.This, in turn, is likely to get reflected in the second-quarter results.

Moreover, the company’s robust distribution network and Prime enabled fast delivery services might have aided the performance of its e-commerce businessduring the to-be-reported quarter.

Prime Free One Day service, AmazonFresh and strengthening two-hour delivery service of natural and organic products such as meat and seafood, fresh produce and staples from Whole Foods Market are expected to have driven customer momentum during the quarter under review.

Further, the company’s strong efforts toward expanding air fleet in order to enhance its delivery services may have contributedto the to-be-reported quarter’s performance. During the second quarter, Amazon extended its partnership with Air Transport Services Group (ATSG) to lease 12 additional Boeing 767-300 converted cargo aircraft out of which one has already joined its cargo operation in May.

All these endeavors are likely to have helped the stock in gaining investor optimism during the to-be-reported quarter. Moreover, these initiatives are expected to have strengthened Amazon’s competitive edge against retailers like Walmart WMT, Target TGT and Kroger KR in the quarter under review.

Apart from the Prime-based retail benefits, the strengthening original content and the overall portfolio on Prime Video may have driven the Prime subscription inthe to-be-reported quarter.

However, the company’s accelerating COVID-19 related expensesare expected to have impacted its operation performance during the second quarter. On its last earnings call, Amazon announced its plans to spend $4 billion in a bid to protect its workforce, delivery vans and customers from COVID-19 infection while addressing the rising customer demand.

Amazon.com, Inc. Price and EPS Surprise

Amazon.com, Inc. Price and EPS Surprise

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

Strengthening AWS Services

Amazon’s expanding cloud services and products portfolio is expected to get reflected in the second-quarter results.

During the to-be-reported quarter, Amazon Web Services (AWS) introduced Amazon Honeycode, which is a fully managed service that is ideal for seamless creation of interactive web and mobile applications.

Further, AWS has made its three new sixth generation Amazon Elastic Compute Cloud (Amazon EC2) instances namely M6g, C6g and R6g generally available. The company has also introduced updated features in Amazon Macie, which is a fully managed data security and data privacy service that aids in discovering and protecting sensitive data in AWS.

Additionally, the company has made AWS Snowcone, Amazon Kendra, UltraWarm for Amazon Elasticsearch Service, Amazon Augmented Artificial Intelligence and Amazon Keyspacesgenerally available during the second quarter. Also, it introduced Amazon AppFlow in the to-be-reported quarter.

We believe all these initiatives might have helped Amazon in winning customers. This, in turn, is expected to have driven AWS’ second-quarter revenues.

Robust Smart Devices Portfolio

During second-quarter 2020, Amazon rolled out the next generation Fire HD 8 tablet family which includes all-new Fire HD 8, Fire HD 8 Plus and Fire HD 8 Kids Edition.

This launch is expected to have benefited the company in the second quarter.

Further, the company’s robust portfolio of Echo smart speakers might have contributed to the to-be-reported quarter’s performance. Additionally, strengthening Alexa features are likely to have aided Amazon in delivering better user experience, which in turn is expected to get reflected in the company’s second-quarter results.

Currently, Amazon carries aZacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Reply) stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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