Amazon (NASDAQ:AMZN) is slated to report its third-quarter 2021 results after the market close on Thursday, Oct. 28. An analyst conference call is scheduled for the same day at 5:30 p.m. EDT. 

The period to be reported is the e-commerce and technology giant's first quarter with Andy Jassy as CEO. 

Investors will probably be approaching Amazon's report with cautious optimism. Last quarter, the company beat Wall Street's earnings expectation but it missed on the top line. Moreover, some investors were disappointed with management's third-quarter revenue guidance.

That said, there seems to be a good reason for investors to be optimistic about Amazon's sales. On Friday, the U.S. Census Bureau released U.S. retail sales numbers that were considerably stronger than expected. Last month, retail sales rose 0.7% from the prior month, whereas economists had been expecting a 0.3% decline. Moreover, the Census Bureau also revised upward its initial August retail sales growth from a 0.7% to a 0.9% increase from July.

In 2021, Amazon stock is up 4.7% through Oct. 15, lagging the S&P 500's 20.4% return. This short-term underperformance shouldn't concern investors, as it's not unusual for a stock to take a rest after a torrid run-up. In 2020, driven by the pandemic, shares soared 76.3%, compared to the broader market's 18.4% return.

Taking these two periods together, Amazon stock is a big winner. Since Jan. 1, 2020, it's up 84.5% -- about double the S&P 500's 42.6% return. 

Here's what to watch in the third-quarter report.

A package in front of a medium blue door of a house.

Image source: Getty Images.

Amazon's key numbers 

Metric Q3 2020 Result Amazon's Q3 2021 Guidance Amazon's Projected Change Wall Street's Q3 2021 Consensus Estimate Wall Street's Projected Change

Revenue

$96.1 billion

$106 billion to $112 billion

Approximately 10% to 16%

$111.6 billion

16%

Earnings per share (EPS) 

$12.37

N/A

N/A

$8.92

(28%)

Data sources: Amazon.com and Yahoo! Finance. Note: Amazon does not provide earnings guidance.

While Amazon doesn't provide guidance for earnings, it does so for operating income. Management expects Q3 operating income to range from $2.5 billion to $6 billion, compared with $6.2 billion in the year-ago period. This outlook assumes about $1 billion of costs related to COVID-19. This guidance range represents operating income declining by about 60% to 3% year over year.

The e-commerce leader is facing tough year-over-year comparables this quarter. The pandemic was raging in the third quarter of last year, a period in which vaccines were not available, so consumers were still heavily flocking to online shopping. 

For context, in the second quarter, Amazon's revenue jumped 27% year over year to $113.1 billion, missing the $115.1 billion the Street had expected, but coming in at the midpoint of its guidance of $110 billion to $116 billion. Revenue got a boost from Prime Day being held in the second quarter this year. By segment, sales in North America, international, and Amazon Web Services rose 22%, 36%, and 37%, respectively. Net income surged 50% to $7.8 billion, which translated to EPS increasing 47% to $15.12. That result easily surpassed the consensus estimate of $12.22.

Guidance for the big holiday quarter

Guidance will be even more important than usual for the upcoming quarter since it's the holiday quarter.

Amazon provides revenue guidance, but not earnings guidance. However, its outlook for operating income gives investors a general idea as to what year-over-year percentage change the company expects on the bottom line.

For the fourth quarter, analysts are currently modeling for Amazon's revenue to increase 14% year over year to $142.6 billion and EPS to fall about 12% to $12.34.

One big reason the Q4 expectations are low is because Amazon held its annual Prime Day event in the fourth quarter of last year. This event was held in June (second quarter) this year, though it's been traditionally held in July (third quarter).

 
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