After the second worst day of trading this year when safe utility stocks proved to be the only area of interest for investors made nervous by the growing trend of weak earnings results in the US and offshore, Apple proved that it was still capable of surprising on the upside when it reported after hours that its December quarter earnings jumped 38% to a new high.
Apple’s shares jumped more than 5% in after hours trading in the wake of the earnings release. That more than reversed a 3.5% fall during regularly trading overnight.
Thanks to booming sales of its new iPhone, Apple reported net income of $US18.0 billion for the quarter, up from $US13.1 billion in the same period a year earlier.
Earnings per share surged 48% to $US3.06 from a split-adjusted $US2.07. Revenue for the quarter soared 30% to $US74.6 billion from $US57.6 billion.
The December quarter is the first of Apple’s financial year (it balances at the end of September) and the news offset the weak results from Microsoft on Monday, and subsequent fall in its share price overnight, plus weak reports from the likes of Caterpillar, Siemens in Germany and Philips in Holland.
As well another slide in durable goods orders (core orders, those without aircraft orders included) fell for yet another month and sent US economists running to cut the 4th quarter GDP forecasts.
The S&P 500 finished trading down 1.3% at 2,029.57. The tech-heavy Nasdaq Composite lost 1.9% to 4,681.50 while the Dow fell 1.7% to 17,387.27.
APPL 1Y – Record iPhone sales at Apple
The Financial Times pointed out this morning that investors have "turned defensive since the year’s start, favouring companies with high dividend yields and low exposure to a stalling European economy. Utilities earn nearly all of their revenues from within the US and face little challenges with currency swings.”
But once again Apple has given a weary market a spark of interest, but it remains to be seen if this will be enough to offset the growing unease among Wall Street investors about earnings.
Marketwatch said that analysts polled by Thomson Reuters estimated that Apple would post earnings of $US2.60 per share on revenue of $US67.7 billion. In October, Apple had projected quarterly revenue of $US63.5 billion to $US66.5 billion, so a clear beat on the upside, which will encourage investors.
Yahoo also cheered the market after hours when it revealed it would spin off its Alibaba shareholding into a separate company to be owned by shareholders. The shares were up nearly 8% after hours as the company’s earnings also beat estimates. AT&T had a narrow beat on market estimates for its 4th quarter as well.
Apples said its earnings were driven by record iPhone sales in the quarter. A massive 74.5 million iPhones during the quarter, up 46% from a year ago and above market estimates for sakes of 66.5 million.
And as Apple sells more iPhones, it’s also selling more expensive phones. The average selling price of the iPhone was $US687 in the quarter compared with $US637 in the year-ago period.
Apple’s performance was especially impressive in China, as suggested earlier this week by US analysts. The company became where the top smartphone manufacturer in the quarter
Apple said its gross profit margin, was 39.9% in the December quarter, above the 37.9% reported in the year period and for the current quarter ending March, Apple says it expects revenue of between $US53 billion to $US55 billion with gross margin of 38.5% to 39.5%.
But it was another sluggish quarter for the iPad. Apple said it sold 21.4 million iPads during the December period, down 18% from a year earlier.
But Mac sales held up with 5.5 million Macs sold during the quarter, up 14.
