We’re about two weeks away from the date Amazon.com, Inc. (AMZN) expects to announce its financial figures for the first quarter of 2016. What should you expect?

The consensus is for Amazon to announce per-share earnings of 58 cents, compared to the loss of 12 cents in the same quarter last year. The Street expects quarterly revenue of $27.98 billion — a 23.2% increase over last year’s sales.

Standing alone, the estimates suggest Amazon is growing both stronger and more profitable. Still, one analyst says these estimates lie on the conservative side based on some findings in his new report, and as such, Amazon stock should report a stronger first quarter than Wall Street expects.

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Carlos Kirjner of Bernstein Research estimates Amazon’s sales at $29.191 billion, or 4.4% above the consensus. Kirjner also expects Amazon to become more probable through the expansion of first party gross margins. (To be clear, “first party gross margins” refers to the gross margins attributable to Amazon’s own inventory.)

Kirjner’s new report points to five reasons AMZN could report financial figures that better analysts’ consensus. The report says analysts’ revenue estimates haven’t factored a “massive discontinuity on the effect of foreign exchange rates.” In essence, Kirjner is saying the dollar has weakened, and as such, its negative impact on AMZN revenue should ease out this year.

The other reasons include a significant increase in fulfillment-by-Amazon pricing, a robust consolidated segment operating income guidance, and as stated earlier, an expansion of 1P gross margins.

Since the foreign exchange factor is quite short term, we’ll skip this to look into other business-related factors.

Improved Fulfilment Expenses

Kirjner’s report looked at fulfilment expenses relative to retail gross profit, concluding there’s been an improvement in fulfillment expenses. I decided to go more direct by comparing year-over-year percentage change in fulfilment expenses over the last 10 quarters to see what I can find:

Year-Over-Year Percentage Change in Fulfillment Expenses

As the table above shows, for comparative quarters, there has been significant improvements in fulfilments expenses. It was only the fourth quarter of 2015 that differed. And it was because of an unexpected demand for Fulfillment by Amazon, as AMZN said during the Q4 earnings call. So there’s a good reason to expect the improvement in FBA expenses to continue showing progress in Q1 earnings, as well as for the entire year.

FBA Is the Future of e-Commerce

As for the prediction for the better-than-expected figures, Kirjner believes that the increase in FBA price that Amazon stock authorized in February has not been factored into current consensus.

He notes that there has most likely not been a significant increase in FBA-associated expenses, so the extra cash coming in should help profitability. The assumption here is that there is no labor inflation and AMZN is working on improving productivity at its fulfillment centers. If true, it’ll drive Amazon’s CSOI north.

With Amazon’s move to start its own cargo division, however, shipping costs associated with FBA could also improve, triggering a long-term boon to Amazon stock.

While Kirjner’s report discusses why Amazon could have a stellar 2016, the aforementioned points are a testament Amazon’s smart long-term positioning.

At the level AMZN is trading right now, Amazon stock is a buy.

As of this writing, Craig Adeyanju did not hold a position in any of the aforementioned securities.

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