Wednesday, April 22, 2009

Apple (AAPL) with Normal Beat and Sandbag Guidance

There are literally >100 earnings reports today, but as you know the new style US economy is dependent on Apple to tell us how we are holding up. Railroads? Chemicals? Industrials? Nonsense. Apple (AAPL) did it's normal report which it is now infamous for - beating sandbagged guidance that analysts continue to fall for, then providing new sandbagged guidance which analysts will fall for. There was a time in 2008 I was literally taking the Apple guidance, saying add 15-20% to their EPS figure and almost exactly hitting it 90 days later. This time analysts had $1.09 and Apple came in at $1.33 - so they beat by 24% in this case. (they did a $1.16 quarter a year ago) What we don't know each quarter is how much the market buys the sandbag and takes Apple literally ... or not. Before we take a quick look at the earnings, a view of the chart shows mouth watering action - nothing to complain about here.

The company continues to do very well, considering the recessionary environment. Iphones are the new star of course, and follow the model we absolutely love - razor and blade. Sell the razor (which Apple gets all the profit from) then benefit from sales of the blades (reoccuring monthly in this case by sharing in carriers subscriptions). So far Steve Jobs "departure" (reports continue to say he is very intimately involved) has had no effect.

Things we're always looking at - gross margins, regional sales, and mix between iPhones, iPods, and that old business... what do you call it... oh yes, computers. Mac sales did drop year over year for the first time since 2003, so even Apple is not immune to the Great Recession; but it was only a 3% drop. Gross margins great at over 36%.

Via AP
  • Strong sales of the iPhone helped Apple Inc. lift its quarterly profit 15 percent, well ahead of Wall Street's expectations Wednesday despite the global economic downturn.
  • For the three months ended March 28, Apple's fiscal second-quarter earnings rose to $1.21 billion, $1.33 per share. In the same period last year Apple earned $1.05 billion, or $1.16 per share. Analysts surveyed by Thomson Reuters had forecast a per-share profit of $1.09.
  • Sales increased 9 percent to $8.16 billion, topping analyst expectations for $7.96 billion.
  • Cupertino, California-based Apple said it sold 3.8 million iPhones in the quarter, more than twice as many as a year ago. Apple also sold 11 million iPods, up 3 percent. But its Macintosh computer line didn't fare quite as well. People bought 2.2 million Macs, a 3 percent drop. Apple updated its desktop line in March, but didn't cut prices.
  • The company also said co-founder Steve Jobs still plans to return from his medical leave as scheduled. "We look forward to Steve returning to Apple at the end of June," Apple's chief financial officer, Peter Oppenheimer, said in a conference call with analysts. Jobs, a survivor of pancreatic cancer, stepped away from his day-to-day responsibilities as CEO in January.
  • ... wider than expected gross margin of 36.4%, much fatter than the 32.5% expected.
  • International sales accounted for 46 percent of the quarter's revenue.
  • For the current fiscal third quarter, the company issued typically conservative guidance of 95 cents to $1 per share in profit on $7.7 billion to $7.9 billion in revenue.
So that means $1.18+ in dog years.

Cool little blog of the earnings conference call here.

[Oct 29, 2008: Apple Surges on Talk of Share Buyback]
[Oct 21, 2008: The Tribe Has Spoken - Apple Good Enough]
[May 22, 2008: What Will Apple be Creating in 5 Years?]
[Apr 23, 2008: Apple Nice Solid Result]
[Mar 20, 2008: Apple Mac Sales Up 60% in February]
[Jan 22, 2008: Apple Beats by $0.14; Issues Typical Conservative Guidance]

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