Why Amazon.com and Starbucks Gained on Earnings

As earnings season reached a fever pitch today, stocks finished with modest gains, led by an 8% jump by Apple after its blowout earnings report last night. Tensions in Ukraine, meanwhile, seemed to keep investors in check as Russia announced military exercises on the border. For the day, the Dow Jones Industrial Average  (DJINDICES: ^DJI  ) was unchanged at 16,502, while the S&P 500 added 0.2%, and the Nasdaq finished 0.5% higher, aided by the iPhone-maker's big jump.

Economic reports were mixed today as initial unemployment claims from last week edged up to 329,000 from 304,000, above estimates at 312,000. New jobless claims for the previous two weeks had fallen to post-recession lows, and the number still remains reasonably low, indicating strong growth in April. Continuing unemployment claims for the week ending April 12 fell to 2.68 million, its lowest mark since December 2007, another encouraging sign for the recovering job market. Elsewhere, durable goods orders for March grew faster than expected, up 2.6% against expectations of a 2% increase. That increase reinforced the notion that poor weather hampered the economy in the first quarter, and economists are optimistic that growth will pick up in the current quarter and through the remainder of the year.

After a 4% gain in regular trading today, Amazon.com  (NASDAQ: AMZN  ) was essentially unchanged in after-hours activity, finishing up 0.3%, despite a 23% increase in revenue. The retail giant posted sales of $19.74 billion, ahead of estimates at $19.43 billion, but profits were still slim, coming in at $0.23 per share, matching estimates. Operating income fell 19%, to $146 million, as spending on new warehouses, technology, and media content jumped.

While the company continues to make strides in expanding its offerings for customers, including its recent deal with HBO to provide an exclusive to some of its older shows, and an expansion into groceries with its new Prime Pantry program, it faces problems with new sales taxes at home and slower growth internationally, where it posted an operating loss last quarter. Its forward guidance was also short on the bottom line as it sees revenue growth of 15%-26% and an operating loss of $55 million to $455 million, though the company is known for its conservative forecasts. Analysts had projected a per-share profit of $0.24.

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Elsewhere, Starbucks  (NASDAQ: SBUX  ) reported another strong quarter after hours as comparable sales improved 6%, and shares gained 1.4% in the extended session. Sales increased 9%, to $3.87 billion, shy of estimates at $3.95 million, while earnings of $0.56 per share were in line with expectations. Lower ingredient costs drove an improvement of 130 basis points in operating margin, to 16.6%, as operating income increased 18%. CEO Howard Schultz touted the company's payment and loyalty programs among other innovations, including the reinvention of its recently acquired Teavana business. Forward guidance was in line with estimates as the company lifted its full-year EPS projection to $2.62-$2.68, and said it expects sales growth of 10% or more.   

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