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Apple’s Quarterly Earnings And Revenue Beat Forecasts
On Tuesday, Apple published the financial results for the second quarter of the fiscal year 2019, which ended March 30. According to the report, earnings were above analysts’ expectations, though revenue declined year-on-year. Nevertheless, the guidance for the next quarter was higher than economists’ predictions, with the company planning to spend $75 billion to buy back its shares. Soon after the financial report, the stock price jumped 4%, and the market cap value got closer to the $1 trillion mark.
Apple’s Quarterly Results Quite Positive
The iPhone maker did well in the last quarter, as it beat analysts’ forecasts. Here is how it performed:
- Earnings per share were $2.46 against $2.36 forecast by Refinitiv consensus estimates
- Revenue was $58.02 billion against the expected $57.37 billion as per Refinitiv consensus estimates
- iPhone revenue in the second quarter was $31.05 billion against the FactSet consensus estimates at $31.1 billion
- Services revenue for the quarter was $11.45 billion against $11.37 forecast by FactSet
- Expected revenue for the third quarter of the fiscal year 2019 ranges from $52.5 to $54.5 billion against $51.94 billion forecast by Refinitiv
Even though the revenue figure was above expectations, it was down 5% compared to the same period in 2018. iPhone revenue also declined, moving down 17.33% year-on-year. iPhone sales accounted for 53.5% of the company’s revenue for the quarter, a decline that points to a healthy diversification.
Investors were also encouraged by the guidance for the third quarter, which was also higher than expected. The improved results suggest that iPhone demand is increasing again and that services revenue goes on with its growth.
On Wednesday, the price of Apple stock, traded on NASDAQ with the ticker AAPL, gained 4.91%, currently trading at around $210 per share.
Tim Cook Happy About China’s Economy
Apple CEO Tim Cook revealed during the earnings call and in an interview with CNBC that China’s economy was improving and that Apple’s business in China would benefit from this positive change. One of the main drivers was the improved trade relations between the US and China. The CEO stated that a sales tax cut allowed Apple to reduce the price of its products, which eventually contributed to a boost in sales. Cook told CNBC’s Josh Lipton:
I believe that the trade relationship — I don’t mean the tariff, I mean the tone — is much better today than it was in the November-December time frame. That affects consumer confidence in a positive way.
The company revealed that it recorded $10.22 billion in sales in Greater China, Taiwan, and Hong Kong.
The positive news about China’s economy might be the main catalyst for Apple’s better-than-expected guidance for the third quarter. This logic is also based on the fact that the company blamed iPhone sales in China for a revenue decline in the previous quarter.
Wedbush analyst Dan Ives commented:
The June guidance was a jaw dropper in terms of strength and speaks to Cook and Cupertino getting back their sea legs after the December debacle.
Apple’s Wearables Also Performed Well
Apple’s Wearables unit, which manufactures Apple Watch, AirPods, and other products, was up about 50% compared to the second quarter of the fiscal year 2018.
iPad revenue was also above expectations, and the CEO stressed the strong revenue of the iPad Pro.
Apple CFO Luca Maestri stated that the positive guidance for the current quarter was driven including by increased sales in the company’s non-iPhone businesses, such as services and wearables. Apple’s product lines performed as follows:
- iPhone revenue was $31.05 billion, which is slightly below FactSet forecast at $31.10 billion
- iPad sales were $4.87 billion against the expected $4.21 billion
- Mac revenue was $5.5 billion while FactSet forecast was at $5.85 billion
- Wearables, Home & Accessories revenue was $5.1 billion versus the expected $4.79 billion
Rating Agencies Not Losing Their Minds
Despite the positive results that were above expectations, Wall Street analysts don’t propagate a bullish stance. Goldman Sachs and Credit Suisse remained neutral on Apple’s stock performance, while Bank of America and Citi maintained their Buy rating.
Citi analyst Mark May said:
Simply put Apple’s results and outlook across most metrics were clearly better than expected. As a result both our and consensus estimates will move slightly higher and based on a 14.5x PE (10% discount to the market) on our slightly higher EPS estimates still result in a target price of $220 and we reiterate our Buy rating.
He added:
It is no surprise that we get a lot of pushback on our Buy rating on Apple given 1) its large market cap, 2) iPhone sales have entered negative growth 3) Android has more market share and less expensive average selling points and 4) investors feel innovation at Apple has been lacking.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets.
