Apple beats on top and bottom lines, and the stock is soaring

Apple CEO Tim Cook. Photo: Scott Olson/ Getty Images.
  • Apple announced earnings on Tuesday, and both its profit and earnings per share were higher than Wall Street expectations.
  • Apple’s guidance was also a big relief to investors worried about iPhone sales.
  • Apple also announced a $US100 billion share buyback program and raised its dividend by 16%.
  • The stock rose in after-hours trading.

Apple reported strong iPhone sales in the first three months of the year, throwing cold water on the most feverish fears gripping some investors, concerned that the tech company’s key business line was running out of steam.

Shares of Apple were up roughly 3% in after hours trading on Tuesday in the US after the company reported fiscal Q2 earnings that beat analysts’ revenue and profit targets, and forecast stronger-than-expected results in the current quarter.

Apple also declared a new $US100 billion stock buyback program, and boosted its dividend to by 73 cents a share.

While sales of Apple’s iPhone did not deliver a big upside surprise, nor did they fall through the floor, as some worried they might.

“This is the first cycle we’ve had where the top-of-the-line iPhone model has also been the most popular,” Apple CEO Tim Cook said on a conference call with analysts on Tuesday.

The $US1,000 iPhone X — Apple’s most expensive iPhone — was the best-selling phone “every week” during the quarter, Cook said. The comments come amid investor worries, fueled by negative press reports, that Apple’s high-priced flagship model was not selling well.

Although Cook would not provide specific sales figures for the iPhone X, he stressed that the performance should be viewed as a sign of strength regardless of the details.

“The team wins the Super Bowl, you want them to win by a few more points, but it’s a Super Bowl winner, and it’s how we feel about it,” Cook said during the call.

A healthy outlook for the June quarter

Perhaps more important than the past three months, Apple provided a reassuring outlook for the coming months.

The company forecast fiscal Q3 revenue between $US51.5 billion and $US53.5 billion, a range with a midpoint comfortably above the $US51.6 billion average analyst forecast.

In recent weeks, “whisper numbers” among some investors event anticipated that fiscal Q3 revenue could come in below $US50 billion, according to a note by GBH Insights analyst Dan Ives, following Apple’s results.

“This guidance number was much better than feared and will be a “major relief” for the stock,” Ives wrote.

Apple’s iPhone average selling price was up 11%, which is one of the reason that iPhone sales rose 14% despite a 3% increase in the number of iPhones sold. “We’re going to continue to provide different iPhones for folks to meet their needs,” Apple CEO Tim Cook said on a call with analysts.

Apple CFO Luca Maestri said the buybacks would start this quarter. Much of the capital return was made possible after Apple was able to bring $US269 billion in overseas holding back to the United States after the tax reform bill passed last year.

Apple has already paid $US275 billion to shareholders since 2012.

Here are the key numbers:

  • Revenue: $61.1 billion, up 16% year-over-year, versus expectations $60.86 billion
  • EPS: $2.73, up 30% year-over-year, versus expectations $2.60 per share
  • Gross margin: 38.3%, down 1% year-over-year
  • iPhone sales: 52.2 million, versus expectations of 51.9 million
  • iPad sales: 9.1 million
  • Mac sales: 4.07 million
  • Q3 guidance: between $51.5 billion and $53.5 billion

Here are the charts:

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