When Amazon (NASDAQ:AMZN) released its third-quarter results last week, the company broke from its recent norm of reporting both better-than-expected revenue and earnings per share. Sure, the company beat expectations when it came to profitability, but worse-than-expected revenue and softer-than-anticipated guidance for the important holiday quarter were enough to spark a sell-off in the stock. Shares have taken a beating, falling a total of 14% over the last two trading days.
But did Amazon stock really deserve to take such a big hit? To get a better idea of how the company is performing, here are four of the most insightful metrics from the quarter.
1. Net sales increased 29%
Amazon's net sales rose 29% to $56.6 billion. Although this is in line with management's guidance for third-quarter sales to be between $54 billion and $57.5 billion, it was below a consensus analyst estimate for the key metric. On average, analysts expected Amazon to report third-quarter net sales of $57.1 billion.
Further, though this was strong revenue growth, it was a notable deceleration from the 39% year-over-year sales growth Amazon posted in its second quarter.
2. Operating income of $3.7 billion
Amazon's operating income soared, rising from $347 million in the third quarter of 2017 to $3.7 billion in the third quarter of 2018. In Amazon's third-quarter earnings call, management credited the company's big jump in operating income to higher revenue, strong cost performance, and rapid growth of its more profitable businesses -- namely Amazon Web Services and advertising.
3. An 11-fold increase in earnings per share
Amazon's strong revenue and operating income growth translated to skyrocketing earnings per share. The key per-share bottom-line metric increased from $0.52 in the year-ago quarter to $5.75.
The company's earnings-per-share growth is just as evident on a trailing-9-month basis. Amazon's earnings per share over the trailing-9-month period was $14.10, up from $2.39 in the same timeframe one year ago.
4. Amazon expects Q4 revenue to rise about 15%
Looking ahead, management guided for fourth-quarter revenue between $66.5 billion and $72.5 billion, representing 10% to 20% year-over-year growth. This midpoint of the guidance range implies about 15% growth.
This year-over-year growth rate would mark a significant deceleration in Amazon's recent revenue growth rates. To this end, Amazon's guidance was lower than what analysts were expecting; before Amazon reported third-quarter results, the consensus analyst estimate for the e-commerce and cloud-computing company's fourth-quarter revenue was $73.8 billion.
Management was careful to note during the company's third-quarter earnings call that the guidance includes a forecast for an 80 basis-point headwind in foreign exchange rates as well as the inclusion of a full quarter of Whole Foods' sales in the year-ago quarter, as the acquisition was made in August of last year. But Amazon CFO Brian Olsavsky also admitted during the call that the holiday quarter is "always a very difficult period for us to estimate."
Given Amazon stock's sharp rise over the past 12 months (shares are up 39% even after the stock's recent decline), the company's slowing revenue may be a good reason to revisit Amazon's valuation. Still, investors should keep in mind that earnings per share are actually outperforming expectations. Amazon's third-quarter EPS of $5.75 crushed a consensus analyst estimate of $3.14.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.