<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Amazon (AMZN) reported first-quarter sales that topped consensus expectations and grew over last year, as consumers increasingly turned to the e-commerce company for deliveries of essentials amid widespread stay-in-place orders.” data-reactid=”16″>Amazon (AMZN) reported first-quarter sales that topped consensus expectations and grew over last year, as consumers increasingly turned to the e-commerce company for deliveries of essentials amid widespread stay-in-place orders.
However, earnings came up light as Amazon incurred costs to adapt to changing consumer demands and workforce needs as the coronavirus pandemic escalated. In addition, the company plans to spend at least $4 billion — virtually all of its forecasted operating profit — on coronavirus-related expenses, which sent its stock down around 5% in after-hours trading.
Here were the main metrics from the report, compared to Bloomberg-compiled consensus estimates:
1Q net sales: $75.5 billion vs. $73.74 billion expected and $59.7 billion Y/Y
1Q earnings per share: $5.01 vs. $6.27 expected and $7.09 Y/Y
The Seattle, Washington-based company has been one of the few corporations fortified by the global coronavirus pandemic. Amazon’s extensive array of everyday goods, groceries and expedited delivery options make it a popular choice among consumers confined to their homes.
Amazon’s net sales of $75.5 billion were up 26% over last year. However, net income of $2.5 billion, or $5.01 per share, fell 30% compared to the $3.6 billion, or $7.09 per share, reported in the first quarter of 2019.
That profitability pressure is likely to increase in the current quarter, with Amazon expecting to spend heavily to protect both workers and consumers from COVID-19 exposure.
“Under normal circumstances, in this coming Q2, we’d expect to make some $4 billion or more in operating profit,” CEO Jeff Bezos said in a statement. “But these aren’t normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.”
Bezos said the company plans to invest in a range of services, including “personal protective equipment, enhanced cleaning of our facilities, less efficient process paths that better allow for effective social distancing, higher wages for hourly teams, and hundreds of millions to develop our own COVID-19 testing capabilities.”
Those costs could contribute to an operating loss of up to $1.5 billion in the second quarter, Amazon said in its guidance — making it the first among major companies this quarter to provide forward-looking estimates.
On the high end, Amazon said it could deliver operating income of as much as $1.5 billion, or still just half the $3.1 billion it delivered in the second quarter of last year. Amazon said it expects net sales will be between $75 billion and $81 billion for the second quarter, representing growth of as much as 28% over last year.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="During the quarter, Amazon hired 175,000 new workers to keep pace with orders, in a testament to the ballooning demand for products off the online marketplace.” data-reactid=”29″>During the quarter, Amazon hired 175,000 new workers to keep pace with orders, in a testament to the ballooning demand for products off the online marketplace.
But the company also had to alter its operations to meet consumer demand more narrowly focused on essential home goods and cleaning products, rather than the typical, broader product mix shift. The company also raised pay for many of its workers, generating additional expenses.
Shares of Amazon were up more than 30% for the year to date through Thursday’s close, making it one of the best-performing stocks in the S&P 500.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This post is breaking. Check back for updates.” data-reactid=”32″>This post is breaking. Check back for updates.
Getting mortgage default insurance is about to get harder after Canada’s federal housing agency announced stricter lending standards on Thursday.
The Canada Mortgage and Housing Corp. (CMHC) says it will no longer allow homebuyers to use borrowed funds for their down payment, will require a higher credit score from at least one borrower and will lower the threshold for how much debt applicants can carry compared to their income.
The changes, which come into effect July 1, will reduce the purchasing power of homebuyers who opt for CMHC insurance and likely leave insured mortgage applicants in pricey markets with fewer options, according to mortgage brokers.
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0:50 Should you buy a house during the coronavirus crisis?
Should you buy a house during the coronavirus crisis?
CMHC’s new debt-ratio policy will lower homebuyers’ purchasing power by up to 11 per cent, according to Robert McLister, founder of rates comparisons site RateSpy.com.
For example, someone making $60,000 a year with a five per cent down payment and no pre-existing debt would be able to afford a home with a maximum home price that is roughly 11 per cent lower than what they would have been able to buy before the new rules, according to McLister’s calculations.
Economists say the measures could discourage some prospective homebuyers from entering the market.
CMHC said it will require a credit score of at least 680, up from the current minimum of 600. It will also lower the maximum amount of debt applicants are allowed to carry compared to their income.
To measure the latter, lenders use two key metrics: the gross debt service ratio (GDS), or the share of income used to cover the mortgage and other housing costs like property taxes, and the total debt service ratio (TDS), the share of income used to cover housing costs plus the cost of servicing other debts.
CMHC is lowering the maximum GDS from 39 per cent to 35 per cent and the maximum TDS from 44 per cent to 42 per cent.
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Open House: Pros and cons of reverse mortgages
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Changes to the GDS threshold and the credit score minimum will have the greatest impact on affordability, said James Laird, co-founder of financial products comparisons site Ratehub.ca and president of mortgage brokerage CanWise Financial, in a statement via email.
Banning the use of borrowed funds to finance down payments will likely have a more marginal effect, as most Canadians rely on savings, investments and financial help from family for down payments, Laird added.
Mortgage insurance, which protects lenders from the risk of borrowers defaulting on their payments, is mandatory in Canada for loans with a down payment of less than 20 per cent.
Mortgage default insurance is available from CMHC as well as private companies such as Genworth MI Canada Inc. and Canada Guaranty Mortgage Insurance Co.
While the new CMHC rules do not apply to Canada’s private mortgage insurers, they could adopt the new policy on a voluntary basis.
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Private mortgage insurance providers could become “the only games left in town” for homebuyers in expensive markets like Toronto and Vancouver, where borrowers generally have higher debt ratios, McLister noted.
McLister is critical of CMHC’s decision to tighten the rules at a time when the economy is already reeling from the impact of the COVID-19 public health restrictions.
“Normally, you don’t rock the boat when you’re already taking on water,” McLister wrote in a blog post shortly after the policy announcement. “But that’s what CMHC has done,” he added.
Canada’s housing agency has said it’s concerned that already high household debt levels will soar in the aftermath of the COVID-19 crisis, increasing the risk that overstretched homeowners won’t be able to keep up with their mortgage payments.
The new rules “will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth,” said CMHC head Evan Siddall in a statement.
U.S. West Texas Intermediate crude oil futures are trading at their highest levels of the week on Friday and inside the price gap created on March 9 when the market opened sharply lower, officially starting the coronavirus-related plunge. The price action strongly suggests the buying is getting stronger especially if traders fill the gap.
The market was initially supported after a report said OPEC and its allies led by Russia would meet on Saturday to discuss extending record oil production cuts and to approve a new approach that aims to force laggards such as Iraq and Nigeria to comply better with the existing curbs.
A second surge in the market occurred following the release of a much better-than-expected U.S. Non-Farm Payrolls report. This surprisingly strong report is a sign that the economy is improving much faster than previously expected, meaning that demand will pick up at a much faster pace than currently estimated.
OPEC+ Wants an Extension and Better Compliance
Saturday’s meetings would start with talks between members of the Organization of the Petroleum Exporting Countries and be followed by a gathering of the OPEC+ group, an OPEC+ source said, after Algerian and Russian media reported the meetings, Reuters reported.
Two OPEC+ sources said Saudi Arabia and Russia had agreed to extend the deeper cuts until the end of July but they said Riyadh was also pushing to extend them until the end of August.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Due to COVID-19, Innovation, Science, and Economic Development Minister Navdeep Bains has postponed the critical 3500MHz spectrum auction for 5G by six months to June 2021.” data-reactid=”23″>Due to COVID-19, Innovation, Science, and Economic Development Minister Navdeep Bains has postponed the critical 3500MHz spectrum auction for 5G by six months to June 2021.
A press release from his department indicated that postponing the auction will allow telecom carriers focus on “providing essential services to Canadians” during the pandemic.
The new date is set for June 15, 2021.
In general, 5G operates over traditional and new cell radio frequency bands that include the low- (sub-1GHz such as 700MHz), mid- (1.6GHz, around 3.5-3.8GHz), and millimetre-wave (mmWave, such as 28GHz) ranges.
The 3,500MHz band is critical specifically in cities where thousands of small cells will be deployed in order to be used for applications like self-driving cars and many consumer applications.
The sum of opening bid prices for the auction is $558 million. Last year’s 600MHz spectrum auction raised $3.57 billion.
“Canada’s telecommunications service providers are doing their part in this difficult time, providing essential services to keep Canadians connected as we face the realities of the COVID-19 pandemic together,” Bains said in the release.
“A number of providers have raised concerns, and the government is implementing measures to address them. The government will continue to reach out to telecommunications service providers—and to the private sector more broadly—to understand their challenges and support them to ensure that Canadians have access to high-quality networks and broad coverage at low prices.”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Recently, Telus and Bell announced plans to partner with Nokia and Ericsson as a 5G supplier. Rogers is partnered with Ericsson to provide 5G services.” data-reactid=”31″>Recently, Telus and Bell announced plans to partner with Nokia and Ericsson as a 5G supplier. Rogers is partnered with Ericsson to provide 5G services.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Additionally, Bains indicated that the first tracking report on the 25 per cent reduction in wireless service prices over the next two years will be available online in July 2020.” data-reactid=”32″>Additionally, Bains indicated that the first tracking report on the 25 per cent reduction in wireless service prices over the next two years will be available online in July 2020.
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