Sales rose, but fell short of analyst expectations

SEATTLE — Net income for Amazon.com Inc. nearly quadrupled during fiscal 2016, aided by 27%-plus growth in total sales, sharply lower non-operating expenses and a dramatically lower effective income tax rate. Earnings for the year and the fourth quarter exceeded Wall Street’s hopes, but sales fell short of analysts’ projections.

Net profit for the year ended December 31 skyrocketed 297.8% to $2.37 billion, or $4.90 per diluted share, ahead of the average estimate of $4.76 per share among analysts surveyed by Thomson Reuters. The fourth quarter saw net income soar 55.4% to $749 million, or $1.54 per share, which handily beat analysts’ projection of $1.35 per share.

The bottom line surge was propelled in part by an effective tax rate of 36.6% for the year and 35.5% for the final quarter. A year ago, Amazon’s net results were trimmed by a 60.6% tax rate for the 12 months year and 48.3% for the fourth quarter.

Net product sales for the 12 months jumped 19.4% to $94.67 billion, while net service sales vaulted 49.0% to $41.32 billion, fueling a 27.1% increase in total net sales to $135.99 billion, shy of analysts’ target of $136.99 billion. Excluding a $550 million unfavorable impact from changes in foreign exchange rates, net sales would have grown 28%.

Fourth-quarter net product sales climbed 15.1% to $30.63 billion, while net service sales leapt 43.6% to $13.11 billion. Total net sales consequently rose 22.4% to $43.74 billion, which failed to meet analysts’ target of $44.68 billion. Backing out a $558 million hit from changes in foreign currency exchange rates, sales would have grown 24%.

Operating income for the year expanded 87.5% to $4.19 billion, or 3.1% of total sales, even though although total operating expenses (which includes cost of sales) nearly kept pace with sales, escalating 25.8% to $131.80 billion. Fourth-quarter operating profit, meanwhile, rose 13.3% to $1.26 billion, or 2.9% of total sales, as total operating expense swelled 22.7% to $42.49 billion.

Looking ahead to the first quarter of fiscal 2017, management projects that net sales will grow between 14% and 23% to a range of $33.25 billion and $35.75 billion, below analysts’ average estimate of $35.95 billion. Moreover, the company expects operating income to come in between $250 million and $900 million, compared with $1.1 billion for the first quarter of fiscal 2016.