First-quarter earnings season is in full swing right now, with none bigger than last week's Amazon.com numbers, which topped analyst estimates. The company is now responsible for a huge portion of the S&P 500's earnings performance.
E-commerce giant Amazon is the largest contributor to earnings growth for the entire S&P 500 for the first quarter and 2023, according to John Butters, senior earnings analyst at FactSet Research Systems.
If Amazon were excluded, Butters says, the blended earning decline (reported plus expected results) for the S&P 500 in Q1 would grow to -5.1% from -3.7%. And the estimated earnings growth rate for the entire S&P 500 this year would fall to 0.2% from 1.2%.
FactSet says that from a macro perspective, "At the midpoint of the Q1 2023 earnings season, S&P 500 companies are recording their best performance relative to analyst expectations since Q4 2021. Both the number of companies reporting positive EPS surprises and the magnitude of these earnings surprises are above their 10-year averages."
Amazon.com also is the largest contributor to earnings growth for the Consumer Discretionary sector. Excluding the company, the estimated 2023 earnings growth for the sector falls to 10.1% from 27.2%.
Amazon Earnings
On April 27, Amazon reported strong first-quarter earnings and sales results that topped Wall Street targets. Amazon earned 31 cents per share, up from the year-ago period's 38-cent loss. Meanwhile, revenue climbed 9% to $127.35 billion.
However, management said Amazon Web Services is seeing slower growth in April vs. Q1. First-quarter sales for the cloud computing unit, Amazon Web Services, rose 16% to $21.4 billion, slowing from 37% growth in the year-earlier period. Analysts had projected AWS growth of 15% for the March quarter.
That spooked investors — AMZN stock dropped 4% in response — because Wall Street analysts have expected AWS revenue growth to trough in the June quarter of 2023, then slowly reaccelerate. However, if the U.S. economy falls into a recession, the AWS slowdown could hit bottom later.
Looking forward, Amazon's 2023 earnings are expected to swing to a $1.56 per-share profit from 2022's 27-cent loss. Annual earnings are expected to jump 65% in 2024.
AMZN Stock Builds New Base
Amazon stock continues to consolidate in a cup-with-handle base that has a 110.96 buy point. AMZN stock is about 7% away from that entry, as it rose 0.4% Thursday. A key flaw is that the stock spent the entirety of the base below the long-term 200-day moving average.
Keep in mind that Amazon is a longtime laggard, with a weak relative strength line. Plus, shares remain about 30% off their 52-week high, so there is plenty of overheard supply that could hinder the stock's rebound.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
