Some positive earnings reports encouraged investors on Friday, and major benchmarks moved up. The S&P 500 (SNPINDEX:^GSPC) briefly edged above its all-time closing high but ended up just short of the record. The Dow Jones Industrial Average (DJINDICES:^DJI) also posted a gain. Technology was the strongest sector, while income-oriented real estate and utility shares lost ground.
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Investments in one-day shipping hurt profit at Amazon
Shares of Amazon plunged as much as 6.7% in after-hours trading yesterday after the company announced third-quarter profit that missed expectations, but buyers stepped in today and the stock closed with a loss of only 1.1%. Net sales grew 24% to $70 billion, a bit better than expected, but earnings per share fell 26% to $4.23. Analysts were forecasting EPS of $4.62.
Sales in North America grew 24% and international sales were up 18% year over year, with both growth rates representing acceleration from last quarter. Amazon Web Services revenue increased 35%, compared with 37% growth in Q2.
Amazon's profit decline was largely due to investments the company is making in shifting Prime shipping from two days to one day. The company said on the conference call that it plans to spend an additional $1.5 billion year over year on shipping costs in Q4. It's also increasing investment in Amazon Web Services, spending more on sales and marketing and growing infrastructure.
Amazon continues its long-term practice of sacrificing profits when it sees opportunities to improve service to its customers, and the earnings miss plus relatively weak guidance seemed to produce a buying opportunity for investors who like the strategy.
Intel surprises investors with strong results
Shares of Intel jumped 8.1% after the company reported third-quarter results that beat expectations on the top and bottom lines. Revenue was flat at $19.2 billion and earnings per share fell 2% to $1.35, but that was much better than EPS of $1.16 on revenue of $18 billion the company had said to expect three months ago.
Standing out in the results was 6% growth in Intel's data-centric businesses, which have been a concern for investors due to strong competition from AMD. Sales to communication service providers grew 11% and the cloud segment returned to growth with a 3% gain. The PC business was down 5%, with higher selling prices partly offsetting a 10% decline in volume. Intel is supply constrained for PC chips and the company continues to see higher-than-expected demand in the segment.
Intel raised its guidance for full-year revenue and profit, helping to boost semiconductor and technology stocks today.