Earnings: Are Amazon and Chipotle Feeding Consumers What They Want?

Amazon AMZN is getting some Hollywood-style attention these days because its Amazon Studios division holds the distribution rights to the hit movie “Manchester by the Sea,” which has been nominated for six Academy Awards, including best picture. This is the first time a streaming service can claim this distinction. But when the e-commerce behemoth releases its Q4 results after the bell today, it will be earnings and revenue in focus. Will they be as handsome and shiny as an Oscar?

Meanwhile, Chipotle Mexican Grill CMG might have a little good news of its own. Traffic appears to be coming back to the restaurant chain after a string of declining sales at stores open longer than year, a key industry metric of growth. CMG’s earnings also come out after the market closes today.

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The post-holiday reports from some of the country’s largest and most iconic retailers have contained some tales of disappointing sales and missed opportunities that have forced many to shutter a number of bricks-and-mortar locations.

But that hasn’t been the narrative from AMZN. In fact, two days after Christmas, AMZN declared the 2016 holiday the “best-ever season,” with a big thanks to hot-selling devices like Echo Dot, Fire TV Stick, Fire tablet and Amazon Echo. All topped its best-sellers list, according to AMZN. The company also noted that more than 1 billion items shipped worldwide through its Prime and Fulfillment divisions during the important holiday shipping season.

(Among the holiday fun facts from AMZN: Enough 4K TVs were purchased to reach the peak of Mt. Everest more than nine times; customers bought enough KitchenAid Mixers to make nearly 7.5 million cookies at once.)

Many analysts covering AMZN appear to have high hopes for Q4 results. Up-and-comer divisions such as Amazon Web Services (AWS), its cloud services and data storage unit, may turn in strong results as well.

AWS, which rang up $3.23 billion in net sales in Q3, is growing at a faster clip, and generating more operating income than AMZN’s North America and International divisions combined—though their collective net revenues were $29.48 billion, according to AMZN’s Q3 earnings release. 

On Wall Street, consensus revenue estimates from third-party analysts stand at $44.87 billion, a nearly 26% leap over the year-ago period of $35.75 billion, according to third-party consensus estimates from the Earnings Analysis tab on the thinkorswim platform from TD Ameritrade. Earnings are expected to come in at $1.40 a share, up 40% from the $1.00 per share last year. AMZN’s earnings have outpaced Wall Street’s expectations in six of the last eight quarters.

The options market has priced in an expected share price move of 4.6% in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim® platform.

Calls have been active at the weekly 850 strike while put activity is notable at the weekly 815 and 800 strikes. The implied volatility sits just above the middle, at the 54^th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

CMG: Margins Con Carne?

Have the tables turned for CMG? The burrito-making fast-food chain appears to be regaining sales momentum after a series of E. coli breakouts in November 2015 and 2016 interrupted the company’s growth.

While it appears that revenues may be higher on a year-over-year basis, profits are expected to slump. Some analysts say they want to know what CMG’s plans might be to beef up its margins, which the chain said in its Q3 release have been pressured by promotional activities and TV advertising tests needed to bring traffic back into the stores.

CMG said in its October press release that it expected Q4 same-store sales to decline “in the low single digits,” its fifth straight quarter of falling same-store sales. However, in a regulatory filing last month, CMG said that comparable-stores sales turned positive in December. But it also stated that it expected Q4 same-stores sales to be down 4.8%, noting that “sales comparisons are lapping an easier compare due to lower sales levels in November and December 2015.”

On Wall Street, analysts reporting to third parties have a Q4 consensus earnings estimate of $0.55 a share, down from $2.17 per share in the year-ago period, according to the Earnings Analysis tab on the thinkorswim® platform. That would be in line with CMG’s forecast of between $0.50 and $0.58 a share, as stated in the December regulatory filing. The consensus revenue estimate from third-party analysts is $1.04 billion, ahead of the $997 million reported a year ago, and in line with CMG’s projection.

The options market has priced in an expected share price move of 4.5% in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim platform.

CMG is not high-volume options trade, but calls have been active in the at-the-money 420 strike while puts have been active at the 400 strike. The implied volatility is at the 27^th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.