Wednesday, May 2, 2012

Apple (AAPL) 2Q 2012 Earnings

            Last Tuesday, Apple’s stock recovered the previous week’s losses after ‘blowout’ second quarter earnings during late-day trading.  The stock gapped up 7%, driven by EPS of $12.30 (almost doubling year-over-year) versus the average estimate of $10.02.  Revenue came in at $39.19 billion (year-over-year growth of 59%) compared to Zack’s Consensus of $36.58 billion.  Gross margin increased 600 basis points to 47.4%.  iPhone sales increased 88% year-over-year to 35.1 million units, fueled by international demand for the iPhone 4S, notably in China.  International sales made up 64% of total revenue in the most recent quarter.  iPod sales fell 15%, as these sales were partially replaced by the hot-selling iPhone & iPad.  Although, CFO Peter Oppenheimer said that the iPod still holds about 70% of the market share of MP3 players.
            iPad sales were up 151% to 11.8 million units.  Although some of these sales cannibalized Mac sales, management insists that this is not a ‘zero-sum game’.  Education & enterprise are two promising markets for future growth.   For example, 94% of Fortune 500 companies have used/tested the iPad in their operations.   Sales to domestic K-12 grades outnumbered Macs by two to one this quarter, after iBooks 2 was introduced in January.  CEO Tim Cook said that the main reason for cutting the iPad 2 price to $399 was to ‘unlock some (price-sensitive) educational demand’.  The iPad occupies about 60% of the tablet market, followed by tablets supporting the Android operating system (32%). 
            China was a clear catalyst for international growth during this quarter.  The iPhone 4S debuted in China in mid-January, as the #3 wireless carrier (China Telecom) was brought into the mix.  This should continue to grow, when China Mobile (#1 carrier) eventually comes into play.  Analysts anticipate Apple to launch a new iPhone (5) this fall, followed by a TV (iPanel) in the winter.  The new iPhone is expected to support 4G service.  Management reiterated (pending board approval) a dividend of $2.65 to be paid out at the end of the next quarter.
            Revenue guidance was lowered for the next fiscal quarter (ending in June).  Production was more efficient than anticipated, so revenue that was anticipated for the next quarter (ending in June) may have been realized in the most recent quarter.  Also, management expects that a strengthening dollar will hurt revenue levels in the next fiscal quarter. 

No comments: