Fourth-Quarter Results Beat
Apple Inc. (
AAPL) fourth-quarter beat the Zacks Consensus Estimate of $1.43 in earnings per share and $9.19 billion in revenue. Earnings in the quarter were $1.82 per share, which also surpassed the company's own guidance. This increased 44% from $1.26 per share reported in the year-ago period.
Strong earnings were due to higher sales in the quarter, which increased 25% to $9.87 billion, representing the second highest revenue growth in the company's history. The tremendous revenue growth was due to higher iPhone sales and increased Mac shipments in the quarter. Apple continues to gain market share in the three major hardware sectors – computers (with very significant gains in portables), music players and smartphones. Apple's revenue increased in every region, including the U.S. and Europe.
The company is currently benefiting from a positive mix shift to the higher-margin iPhones/iPod business from its traditional MP3 players, as a result of which non-GAAP gross margins grew to 42.5%, a 350 basis point increase year over year. The lower-than-expected increase in component costs also contributed. The company also benefited from the ramp-up of new products. We expect Apple to post higher margins as a result of higher sales and the continued mix shift in the next several quarters.
On a non-GAAP basis, operating margin for the quarter was 30.9%, an increase of 200 basis points year-over-year and better than the company's expectation. This was due to higher-than-anticipated revenue and gross margin.
Apple's balance sheet remains strong. Cash and investments were $34.0 billion at the end of quarter versus $31.1 billion in the previous quarter. Apple generated cash flow of $3.1 billion during the quarter versus $2.3 billion generated in the previous quarter.
Quarterly Highlights
The company released Snow Leopard, the latest upgrade to the Apple Mac operating system in the quarter. In addition, Apple announced new upgrades to its iTunes and the iPod digital media players at a media event in Sep. The company plans to release iPhones in China via
China Unicom (
CHU) and entered into a three-year agreement to sell the iPhone 3G and 3GS in the country. We continue to believe that Apple will outperform its peers, given its strong iPhone sales and new product launches.
Macintosh –– Apple shipped a record 3.05 million Macintosh computers in the quarter, representing a 17% unit increase year-over-year due to the increased demand for Snow Leopard.
