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Apple (AAPL) Q2 Earnings and Revenues Beat, Increase Y/Y
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Apple Inc. (AAPL - Free Report) reported second-quarter fiscal 2017 earnings of $2.10 per share and revenues of $52.9 billion, easily beating the Zacks Consensus Estimate of $2.02 and $52.6 billion, respectively. On a year-over-year basis, earnings grew 10.5% and revenues increased 4.6%.
Product Details
Shares were down 1.8% in aftermarket trading as sales of iPhone 7 units declined year over year.
Total iPhone unit sales came in at about 50.7 million, down 1% year over year. However, revenues from iPhone grew 1% from the year-ago quarter to $33.3 billion (62.9% of total revenue).
Services— including revenues from Internet Services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services—surged 18% year over year (with an extra week in the quarter) to nearly $7 billion. App Store sales grew 40% year over year. For Services revenues, Apple remarked that “it's well on the way to being the size of a Fortune 100 company.”
Management also noted that Apple Pay reported transaction volume growth of 450%, buoyed by expansion to markets like Taiwan and Ireland. At present, Apple Pay is available in 15 markets.
Apple Mac unit sales were up 4% year over year to approximately 4.2 million, while revenues grew 14% from the prior-year quarter to $5.8 billion.
Coming to iPad, Apple sold 8.9 million units in the quarter, down 13% year over year. Revenues of $3.9 billion were down 12% from the prior-year quarter.
Other products—including revenues from Apple TV, Apple Watch, Beats products, iPod, and Apple-branded and third-party accessories—increased 31% year over year to over $2.9 billion.
Demand for Apple’s products improved across most of the geographical regions except greater China. As much as 65% of sales were from the International markets.
The Americas (the biggest market for Apple) generated revenues of approximately $21.2 billion in the quarter, up 11% year over year.
Europe generated nearly $12.7 billion in revenues, up 10% on a year-over-year basis.
Revenues from Japan rose 5% year over year to $4.5 billion while the rest of Asia Pacific generated revenues of $3.8 billion, up 20% year over year.
Owing to persistent macroeconomic weakness, Apple revenues declined around 14% year over year in the Greater China region to $10.7 billion.
Margins
Gross margin was 38.9%, a decline of 50 basis points (bps) from the year-ago quarter.
Operating expenses increased 9.4% year over year to $6.5 billion due to higher research & development expenses as well as selling, general and administrative expenses. As a result, operating margin plunged 100 bps from the year-ago quarter to 26.7%.
Balance Sheet and Cash Flow
Apple’s cash and cash equivalents (and short-term marketable securities) were $67.1 billion at the end of the quarter and long-term debt was $84.5 billion.
For the six months ended on Apr 1, 2017, cash generated from operating activities was $39.6 billion.
Apple returned about $10 billion this quarter through dividends and share repurchases. It has also increased share repurchase authorization by $50 billion, taking total authorization to $300 million and extending expiration to Mar 2019. From Aug 2012 to Mar 2017, Apple has returned $211 billion to shareholders.
The company also raised its quarterly dividend by 10.5% to 63 cents per share, payable on May 18, 2017 to shareholders of record as on May 15.
Guidance
For the third quarter of fiscal 2017, Apple forecasts revenues in a range of $43.5–$45.5 billion. The Zacks Consensus Estimate is pegged at $45.1 billon.
Gross margin is expected within 37.5–38.5%, while operating expenses are projected within $6.6–$6.7 billion. Operating expenses will be in the range of $6.6 billion and $6.7 billion. Other income/ (expense) is likely to be $450 million, while tax rate is expected to be 25.5%.
Our Take
Declining iPhone unit sales are a concern. Also, the macroeconomic headwinds remain for now, especially in China—one of the high-growth regions for Apple. Moreover, competition from local players is hindering iPhone’s growth in China.
However, for long it was speculated that the buyers are likely to hold on to their devices a little longer, given the buzz surrounding iPhone 8. Labeled a mega edition with features including a glass body, a dual curved edge-to-edge OLED display with a built-in Touch ID sensor and wireless charging, iPhone 8 is already termed a “super cycle.”
Apple is also working on developing technologies such as artificial intelligence (AI) and augmented reality/ virtual reality (AR/VR), which are fast emerging as lucrative business opportunities. The company’s interest in the autonomous car project is understandable as it is now being labeled a big business opportunity. Apple also remains focused on increasing its market share in India.
Plus, Apple’s Services business is expected to remain strong as it is mostly dependent on the already installed Apple devices. Moreover, in the long run, Apple is expected to benefit from its robust cash position as well as strength in technology and the ecosystem that it has built supported by its loyal customer base. Further, its enterprise collaborations with the likes of Deloitte, IBM Corp. (IBM - Free Report) , Cisco (CSCO - Free Report) and SAP SE (SAP - Free Report) are expected to be important long-term growth drivers.
Zacks Rank & Stock Price Movement
Currently, Apple has a Zacks Rank #3 (Hold). Apple’s shares marginally underperformed the broader market in the past one year. Shares of Apple registered growth of 53.31%, compared with the Zacks Computer Mini industry’s gain of 55.14%.
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Image: Bigstock
Apple (AAPL) Q2 Earnings and Revenues Beat, Increase Y/Y
Apple Inc. (AAPL - Free Report) reported second-quarter fiscal 2017 earnings of $2.10 per share and revenues of $52.9 billion, easily beating the Zacks Consensus Estimate of $2.02 and $52.6 billion, respectively. On a year-over-year basis, earnings grew 10.5% and revenues increased 4.6%.
Product Details
Shares were down 1.8% in aftermarket trading as sales of iPhone 7 units declined year over year.
Total iPhone unit sales came in at about 50.7 million, down 1% year over year. However, revenues from iPhone grew 1% from the year-ago quarter to $33.3 billion (62.9% of total revenue).
Services— including revenues from Internet Services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services—surged 18% year over year (with an extra week in the quarter) to nearly $7 billion. App Store sales grew 40% year over year. For Services revenues, Apple remarked that “it's well on the way to being the size of a Fortune 100 company.”
Management also noted that Apple Pay reported transaction volume growth of 450%, buoyed by expansion to markets like Taiwan and Ireland. At present, Apple Pay is available in 15 markets.
Apple Mac unit sales were up 4% year over year to approximately 4.2 million, while revenues grew 14% from the prior-year quarter to $5.8 billion.
Coming to iPad, Apple sold 8.9 million units in the quarter, down 13% year over year. Revenues of $3.9 billion were down 12% from the prior-year quarter.
Other products—including revenues from Apple TV, Apple Watch, Beats products, iPod, and Apple-branded and third-party accessories—increased 31% year over year to over $2.9 billion.
Apple Inc. Price, Consensus and EPS Surprise
Apple Inc. Price, Consensus and EPS Surprise | Apple Inc. Quote
Geographical Performance
Demand for Apple’s products improved across most of the geographical regions except greater China. As much as 65% of sales were from the International markets.
The Americas (the biggest market for Apple) generated revenues of approximately $21.2 billion in the quarter, up 11% year over year.
Europe generated nearly $12.7 billion in revenues, up 10% on a year-over-year basis.
Revenues from Japan rose 5% year over year to $4.5 billion while the rest of Asia Pacific generated revenues of $3.8 billion, up 20% year over year.
Owing to persistent macroeconomic weakness, Apple revenues declined around 14% year over year in the Greater China region to $10.7 billion.
Margins
Gross margin was 38.9%, a decline of 50 basis points (bps) from the year-ago quarter.
Operating expenses increased 9.4% year over year to $6.5 billion due to higher research & development expenses as well as selling, general and administrative expenses. As a result, operating margin plunged 100 bps from the year-ago quarter to 26.7%.
Balance Sheet and Cash Flow
Apple’s cash and cash equivalents (and short-term marketable securities) were $67.1 billion at the end of the quarter and long-term debt was $84.5 billion.
For the six months ended on Apr 1, 2017, cash generated from operating activities was $39.6 billion.
Apple returned about $10 billion this quarter through dividends and share repurchases. It has also increased share repurchase authorization by $50 billion, taking total authorization to $300 million and extending expiration to Mar 2019. From Aug 2012 to Mar 2017, Apple has returned $211 billion to shareholders.
The company also raised its quarterly dividend by 10.5% to 63 cents per share, payable on May 18, 2017 to shareholders of record as on May 15.
Guidance
For the third quarter of fiscal 2017, Apple forecasts revenues in a range of $43.5–$45.5 billion. The Zacks Consensus Estimate is pegged at $45.1 billon.
Gross margin is expected within 37.5–38.5%, while operating expenses are projected within $6.6–$6.7 billion. Operating expenses will be in the range of $6.6 billion and $6.7 billion. Other income/ (expense) is likely to be $450 million, while tax rate is expected to be 25.5%.
Our Take
Declining iPhone unit sales are a concern. Also, the macroeconomic headwinds remain for now, especially in China—one of the high-growth regions for Apple. Moreover, competition from local players is hindering iPhone’s growth in China.
However, for long it was speculated that the buyers are likely to hold on to their devices a little longer, given the buzz surrounding iPhone 8. Labeled a mega edition with features including a glass body, a dual curved edge-to-edge OLED display with a built-in Touch ID sensor and wireless charging, iPhone 8 is already termed a “super cycle.”
Apple is also working on developing technologies such as artificial intelligence (AI) and augmented reality/ virtual reality (AR/VR), which are fast emerging as lucrative business opportunities. The company’s interest in the autonomous car project is understandable as it is now being labeled a big business opportunity. Apple also remains focused on increasing its market share in India.
Plus, Apple’s Services business is expected to remain strong as it is mostly dependent on the already installed Apple devices. Moreover, in the long run, Apple is expected to benefit from its robust cash position as well as strength in technology and the ecosystem that it has built supported by its loyal customer base. Further, its enterprise collaborations with the likes of Deloitte, IBM Corp. (IBM - Free Report) , Cisco (CSCO - Free Report) and SAP SE (SAP - Free Report) are expected to be important long-term growth drivers.
Zacks Rank & Stock Price Movement
Currently, Apple has a Zacks Rank #3 (Hold). Apple’s shares marginally underperformed the broader market in the past one year. Shares of Apple registered growth of 53.31%, compared with the Zacks Computer Mini industry’s gain of 55.14%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>