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Experiencing positive earnings for the fourth straight quarter in Q1 2016, Amazon may have received added vindication of its long-standing core business strategies. Born out of Jeff Bezos’ vision of forming an ‘exotic and large’ company (metaphorically like South America and its Amazon River), America’s largest online retailer has come a long way since Bezos started the company when he was only 30 years old.

Fascinated by the internet revolution, Bezos quit his job as Vice President of a Wall Street firm in 1994 to build his dream company. Beginning in the garage of his Seattle home, the first round of start-up funding came from his parent’s personal savings (his father had little knowledge of the internet at the time, as revealed by Bezos in an interview.

Beginning as an online bookstore, Amazon garnered sales up to $20,000 per week after only a few months in business. In 1997, it went public at $18 per share on the NASDAQ. Kleiner Perkins Caufield & Byers saw a 55,000%+ return by 1999 on their $8 million investment made in 1995.

Innovation and Expansion Drive Future Profits

Though Bezos’ unusual strategy of prioritizing investments in expansion/innovation for long-term growth over profit-making may have made some investors skeptical, the e-commerce giant’s survival through the dot com bust proved it to be a force. Amazon generated its first profit-amounting to $5 million in Q4 2001, on revenues exceeding $1 billion.

Heralded by Time magazine as the “Person of the Year” in 1999 for his success in e-commerce, Bezos expanded his business to include electronics, apparels, jewelry, and more alongside books. Also noteworthy are the host of acquisitions, Amazon has made so far (close to 5), including Junglee, IMDb and Zappos.

Launching a convenient mode of e-reading through Kindle, introducing customer ratings on books and renting out computer server space as part of its cloud services, Amazon has been a pioneer in many areas. Its innovations are reaping huge benefits for the company with profits soaring to an all-time quarterly high of $513 million in Q1 2016 (compared to losses of $57 million a year ago). This surge was largely driven by cloud computing services.

Bezos to Expand Worldwide Networks

Furthermore, Amazon is set to launch in-house shipping and logistics services to connect factories in China and India to customers in the New York, Atlanta and London (according to a 2013 report to Amazon’s senior management team). The proposed project, named Dragon Boat, could potentially give some serious competition to incumbents like UPS and FedEx.

Its global expansion plans also include a $5 billion investment in India. In a recent meeting with global leaders in Washington, Bezos stated his intentions to inject $3 billion in the company’s rapidly growing Indian market, adding to the previously committed $2 billion. He further expressed his vision to have Amazon’s largest software engineering and development center placed outside the U.S. in Hyderabad, India. Bezos particularly emphasized the 45,000 jobs already created by his organization in India, and that he continues to see a lot of promise in the country.

Bottom Line for Investors

Amazon is the epitome of a start-up success story. Notwithstanding early criticisms, the online retailer has emerged as one of the fastest growing companies while staying true to its core philosophy of encouraging innovation above everything else. With recent earnings results bearing further testimony to the juggernaut, it shouldn’t be too surprising if its stock prices reach new highs in coming weeks.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

Since the beginning of the smartphone revolution, there has been no love lost between Apple, Inc. and Samsung Electronics Co. Ltd. They found themselves in a worldwide battle starting in 2010 when Samsung, then an Apple supplier, released a very iPhone-like product in its Galaxy lineup .

Over the years, Apple succeeded in creating a niche market for itself by catering to the quality conscious consumers. Samsung, however, operated with an emphasis on vertical integration catering to the masses at a lower price point. This strategy worked for Samsung as they became the leader in the price-conscious Asian subcontinent and ruled the global smartphone market,  until Apple took over first position in 2014.

As a result, Samsung has posted unremarkable quarterly results the past two years as competitors have stolen market share, especially in key growth markets like China and India. Apple was one of those successful competitors, and during this period they’ve managed to post the highest quarterly results ever by any company (Q1 2015).

However, Q1 2016 saw an end to the Apple's streak of iPhone-powered sales, when the company reported its first quarterly sales drop in more than a decade. Sales in value terms dropped by 13% to $50.6 billion and, in terms of volume, it was down by 16% (and stood at 51.2 million compared to 61.2 million in the same quarter a year ago). Profits hovered around $10.5 billion ($1.90 per diluted share), down 22% from $13.6 billion ($2.33 per diluted share) same quarter last year.

It was pretty much year-over-year weakness on all fronts, and it represented Apple’s worst quarter since 2007. Q1 2016 also saw the first-ever decline in iPhone sales, which may explain why Apple shares were down some 10% through mid-May (the S&P 500 is essentially flat over the same period).

Samsung, though, delivered strong results for the first quarter of 2016 on the back of sales posted by its flagship smartphones, the Galaxy S7 and S7 Edge. Coupled with this was the streamlining of its mid-to-low end smartphones—which helped the company reduce costs, improve the product mix, and increase sales of OLED panels (just to name some of the advantages). These factors helped the company post very strong numbers by comparison. Revenues grew 5.7% year over year and operating profit for the quarter also jumped 12%.

Bottom Line for Investors

In the last couple of years, we have seen a pattern of Samsung consistently losing market share with each new release of an Apple iPhone. Conversely, Apple’s market share has not been hurt as much with each of Samsung’s new Galaxy S phone releases. Still, recent data suggests that the tide may be turning again, as Samsung’s lower price points and revamped product line may better position it in Asia and other emerging markets (particularly as the economic cycle wears on and wealth is created at a slower pace).

For example, Samsung recently introduced its "S bike" mode on Galaxy phones, a feature for India's legions of motorbike riders which, when activated, notifies callers that the phone's owner is riding and cannot answer. This innovation is a testament to Samsung’s sensitivity to its customer base in Asia, and their needs. But, just when you thought that would give Samsung a leg-up in the battle, Apple is soon rolling out their emerging markets-focused phones. May the tug-of-war continue and “the odds be ever in their favor…”  

FREE Download – Zacks Economic Outlook: May, 2016

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

Apple Inc. did something it hasn’t done in 13 years—experienced sales declines quarter over quarter. It was a tough quarter for the world’s largest company with earnings per share coming in at a lower than expected ($1.90), and with profits falling by nearly $3 billion to $10.5 billion on the quarter. Revenues also disappointed, with a 13% decline on plummeting Asia sales. China fell by approximately 26% as consumers seemingly latched onto the Galaxy S7 instead (which was strategically launched in Q1). As if by a changing of the guard, Samsung crushed first quarter earnings on the coattails of strong Galaxy S7 sales, posting a 14% profit increase to $4.6 billion. The crossover in our view does not necessarily speak to the long-term strength or weakness of one company versus the other, but does offer insight into the underlying stability of the market for smartphones. Strong earnings may have swapped in the quarter, but the consumer has remained strong throughout.

FREE Download – Zacks Economic Outlook: May, 2016

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

There is no denying that the manufacturing sector is an integral part of the U.S. economy – the sector contributes around 2.17 trillion to GDP  and accounts for about 12% of our nation’s total output. However, the years of strong output and jobs is largely a thing of the past. A little known, and underappreciated fact, is that U.S. manufacturing output is currently nearing all-time highs. However, this growth “feels different” jobs haven’t grown with it.  

Manufacturing Value-Added and Employment as a Share of the Total U.S. Economy, 1960–2011 (in 2005 prices)

(Source: Industry Accounts of the Bureau of Economic Analysis)

Manufacturing output, as a share of GDP, has remained stable in the last decade or so. Why? Because automation has enabled productivity to skyrocket driving high skilled manufacturing which has seen incredible growth (think computers, electronics, semiconductors and so forth). Politicians on the campaign trail love targeting the manufacturing sector and make promises to create new jobs or “bring manufacturing back.” What they really should be focused on is training more Americans in high-skilled manufacturing so we can continue to dominate that space. Few, if any, politicians will do this, however, as it means potentially foregoing too many votes in purple states.

The reality is that 90% of the manufacturing industry that lies outside of the computer and electronics sectors have seen their share of real GDP fall, while productivity growth has been fairly slow. Many would say it’s because we’re shipping these jobs to China, which is true, but China’s manufacturing sector has also been on the decline in the last decade or so. Some of these jobs simply aren’t needed anymore, and they almost certainly are not coming back.

Total Manufacturing Employment from 1940 - 2016

(Source: U.S. Bureau of Labor Statistics)

Blame productivity…or don’t – declines in employment started in earnest around 1979. Notable, and enduring, productivity gains among U.S. manufacturers over the past few years continue to provide the U.S. manufacturing sector with a sustained competitive advantage over most other countries (evident in that productivity of the U.S. manufacturers has gone up by 40% since 2003). That’s a good thing!

Here’s the key: In 2016, American productivity is not only at its all-time high but is also nine times more productive per employee than the manufacturers in China and has surpassed Japan (the second best economy) by nearly 25%. Compared with emerging economies in Mexico, India, Brazil and China, U.S. production efficiency is around 80-90% higher .

Industrial Production Index for the United States

(Source: Industrial Production Index)

By curtailing the in-house production of less valuable items like garments, toys or certain electronics, American manufacturers focused on the production of value – adding items where comparative advantage is greatest enabling the U.S. to achieve high levels of efficiency. From an economic perspective, nothing could be better news - U.S. manufacturing creates 100% more value with 37% fewer workers.

Creating more value with fewer workers means Americans are more efficient and productive than ever. Global free trade, outsourcing the production of less valuable items and technological innovation in areas of software, robotics and communications has enabled the American manufacturer to win on a global scale.

Bottom Line for Investors

It is a fact that, post 2009 financial crisis, the U.S. manufacturing industry has been in a decline, perhaps more so than if economic conditions weren’t so middling. The recent oil price glut, strong dollar and gloomy export scenario have made the fall all the more inexorable and caused jobs to disappear from the industry.

Despite these obstacles, production efficiency achieved by the U.S. manufacturing industry deserves praise, not criticism, and is a testament to the technological strength amassed by Americans in the last few decades.

It’s difficult to experience job losses anywhere and it’s never easy to shift careers. But, it’s important to remember that a number of job losses from the manufacturing sector have shown up elsewhere as job gains in other parts of the economy, many in high-skilled manufacturing. These economic changes are, no doubt, painful in the short run (think about the transition from an agricultural economy to an industrial economy and how many farmers were displaced). However, in long run, it brings gains in output and employment not only to the U.S., but for the rest of the world as well.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.