Amazon, Starbucks fall after earnings letdowns

Shares drop after hours, after earnings and guidance from both high-flyers disappoint investors. The S&P nearly sets a new closing high.

By Charley Blaine Apr 25, 2013 6:11PM
Emile Wamsteker/Bloomberg via Getty Images; David Paul Morris/Bloomberg via Getty ImagesShares of Amazon.com (AMZN) tumbled after hours on Thursday, even as the online retailer reported better-than-expected earnings. But the company's guidance for the second quarter was lower than expected.

Starbucks (SBUX) shares also moved more than 2% lower, despite boosting its guidance for the fiscal year.

The earnings reports came after stocks finished higher -- in a rally set off by a better-than-expected report on jobless claims. It wasn't clear if the reports will depress stocks on Friday.

The Standard & Poor's 500 Index ($INX) came within about a point of its all-time closing high of 1,593.37 before falling back.

Amazon.com said it earned 18 cents a share in the first quarter, ahead of estimates of 9 cents a share. But the earnings were down from 28 cents a share a year ago. Revenue was $16.07 billion, up 21.9% from a year ago and slightly less than the Street estimate of $16.16 billion.

The company expects $14.5 billion in revenue for the second quarter, up from $12.83 billion. Wall Street, however, has been expecting $15.9 billion. Operating income, meanwhile, is projected in a range of a loss of $340 million to a gain of $10 million, a touch lighter than expected.

Most analysts said the company continues to invest heavily in new equipment and fulfillment centers, to make shipping more efficient.

As a result, free cash flow -- the remainder after capital expenditures -- has been squeezed. Free cash flow fell 85% to $177 million for the 12 months ended on March 31, compared with $1.15 billion the 12 months ended March 31, 2012. Most of that was due to the company spending $1.4 billion to buy its headquarters campus in downtown Seattle.

Amazon.com regards free cash flow as the key profit metric.

The company offered little information on how its Kindle e-reader is performing. But it said it is making investments in new web-only video content through its Amazon Videos service. Programs include performances by John Goodman, Jeffrey Tambor and Bebe Neuwirth.

North American revenue was up 26% to $9.39 billion; international revenue of $6.70 billion was a gain of 16%.

Shares were down $6.21 to $264.49 after hours after falling to as low as $258. The regular close of $247.70 was up $5.91 on the day.

Starbucks earned 48 cents a share in the quarter, up from 4 cents a year ago. Revenue was up 11.3% to $3.56 billion.

Same-stores sales, a key growth measure, were up 6% from a year ago. European comparable sales were down 1%, as stores struggled in a difficult economy. That was less than expected.

Same-store sales were up 9% in China and Asia, also less than expected. Starbucks opened its first store in Ho Chi Minh City, Vietnam.

Shares were down $1.72 to $58.78. The regular close of $60.50 was up 67 cents.

The earnings came in the midst of a modest but solid market rally. The S&P 500 and the Nasdaq Composite Index ($COMPX) enjoyed their fifth straight session of gains; the Dow Jones Industrials ($INDU) finished up for the fourth time in the last five days.

The Dow closed up 25 points to 14,701. The S&P 500 added 6 points to 1,585, while the Nasdaq rose 20 points to 3,290 after briefly topping 3,300, its 2013 closing high.

Nineteen of the 30 Dow stocks were higher, along with 354 S&P 500 stocks and 76 stocks in the Nasdaq-100 Index ($NDX). The index was up 15 points to 2,489.

Crude oil (-CL) jumped $2.21 to $93.64 a barrel in New York. Gold (-GC) surged $38.30 to $1,462, the biggest one-day gain since Sept. 13 and biggest percentage gain since June 29.

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