Will Amazon (AMZN) Surprise This Earnings Season? - Analyst Blog

Amazon.com Inc. AMZN is set to report first-quarter 2014 results on Apr 24. Last quarter, it posted a 28.2% negative surprise. Let's see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Amazon's fourth quarter 2013 results fell below expectations with both the top and bottom lines missing the Zacks Consensus Estimate. This is due to increasing competition in the Electronics and General Merchandise (EGM) business, where year-over-year growth dropped off sharply in both the North America and International markets. Increased costs, as the company built inventories, along with a higher tax rate, adversely impacted profitability.

However, the online retailer's venture into new segments including cloud computing services and devices will boost its digital media sales and attract new users. Moreover, Amazon's existing platforms Kindle, Prime and AWS will continue to contribute to revenues.

Amazon's main strengths include its extensive selection, free shipping and excellent user experience that make it one of the leading players in the fast-growing e-commerce market.

Earnings Whispers?

Our proven model does not conclusively show that Amazon will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 21 cents. Hence, the difference is 0.00%.

Zacks Rank: Amazon's Zacks Rank #2 (Buy), when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Advanced Energy Industries, Inc. AEIS, with Earnings ESP of +10.00% and a Zacks Rank #1 (Strong Buy).

E-Commerce China Dangdang Inc. DANG, with Earnings ESP of +33.33% and a Zacks Rank #1.

ON Semiconductor Corp. ONNN, with Earnings ESP of +6.67% and a Zacks Rank #1.