Apple Inc. (
reported robust second quarter 2012 results, which breezed past the
Zacks Consensus Estimates. Apple earned $12.30 per share in the
reported quarter, handily beating the Zacks Consensus Estimate of
$10.03. Apple shares surged approximately 7.7% to reach $603.81 in
after hours trading.
Earnings soared 92.2% from $6.40 reported in the year-ago
quarter and were also ahead of Apple's conservative guidance of
$8.50. Apple's second quarter beat was primarily based on the
strong demand for iPhone 4S and the new iPad, which was released in
Total revenue in the quarter surged 59.0% year over year to
$39.19 billion and beat both the company's forecast of $32.50
billion and the Zacks Consensus Estimate of $36.58 billion. The
year-over-year upside was primarily driven by strong iPhone and
Apple shipped 4.02 million Macintosh computers in the reported
quarter, representing a 7.0% year-over-year increase, attributable
to strong demand for Macs across all geographic regions,
particularly in the Asia-Pacific region ( up 29.0% year over
iPhone unit sales were 35.06 million during the quarter,
representing a year-over-year growth of 88.0%. Revenues from iPhone
handset sales, accessory sales and carrier payments skyrocketed
85.0% year over year to $22.69 billion in the quarter.
This robust growth was primarily driven by strong demand across
all geographic regions, particularly in the Asia Pacific (including
China) and Japan where sales more than doubled on a year-over-year
basis during the quarter.
Total iPad units sold in the quarter were 11.80 million versus 4.69
million sold in the prior-year quarter. Recognized revenues from
iPad and accessories during the quarter shot up 132.0% year over
year to $6.6 million, driven by strong demand for the new iPad.
Apple sold 7.67 million iPods during the quarter, representing a
unit decline of 15.0% from the year-ago quarter. According to MPD
data, Apple's share of MP3 players in the U.S. was over 70% in
March, and iPod emerged as the highest-selling MP3 player based on
the latest data published by GFK. iTunes store generated revenues
of $1.9 billion during the quarter.
Retail revenues in the quarter increased 38.0% year over year to
$4.4 billion, primarily attributable to higher iPhone and iPad
sales. During the quarter, Apple opened 2 new retail stores, 1 of
which was outside the United States. At quarter end, Apple operated
363 stores worldwide. Apple's app store continues to top the charts
with more than 600,000 apps. iCloud reported more than 125 million
Gross margin expanded 540 basis points (bps) year over year to
47.4%, well above management's forecast of 42.0%, driven by lower
commodity and other product costs, better-than-expected revenue and
product mix. Operating margin increased to 39.3% from 32.0%
recorded in the year-ago quarter. Total operating expenses
increased 35.7% year over year to $3.18 billion (down 140 bps to
8.1% as a percentage of revenue).
Net income stood at $11.6 billion in the quarter, reflecting an
astounding growth of 94.0% from $6.00 billion in the year-ago
Apple's balance sheet remains strong with cash and investments
of $110.2 billion at the end of the quarter compared with $97.6
billion in the previous quarter. Apple expects to announce a
dividend of $2.65 during its third quarter conference call in July,
Third Quarter Guidance
For the third quarter of fiscal 2012, Apple expects revenues of
approximately $34.0 billion. Earnings are projected at
approximately $8.68 per share. The Zacks Consensus Estimate was
pegged at $9.95 per share at the time the company reported its
second quarter results.
Apple expects gross margin to be 41.5%, reflecting stock-based
compensation expense of approximately $70.0 million. Operating
expenses are estimated to be $3.3 billion, including about $385.0
million in stock-based compensation, while other income and
expenses are anticipated to be around $175.0 million. The tax rate
is estimated to be about 25.25%.
Apple has outperformed the broader market in recent times. Apple
shares have surged 36.24% year to date compared to a 7.4% growth in
S&P 500. We believe that Apple is currently undervalued, and
expects further upside in share prices over the next 12 months.
We believe that Apple remains the biggest growth story based on
its superior product pipeline, Apps, iCloud and Apple TV. Apple is
also well positioned to gain from a loyal customer base and
international expansion going forward, in our view.
Apple is currently expanding its business in China and other
developing nations. iPhone 4S has received stupendous response in
China, where sales increased five fold on a year-over-year basis in
the second quarter. Apple's ability to spur the popularity of its
products in developing nations, where pricing is often an important
consideration, will go a long way in deciding the company's future
growth, in our view.
Although stiff competition from Samsung, HTC, and
Google Inc. (
, saturation in its major markets and increasing legal complexities
remain concerns, continuing strong demand for its products and
increasing international sales will boost results in the near term,
in our view.
We maintain our Outperform recommendation over the long term
(6-12 months). Currently, Apple has a Zacks #1 Rank, which implies
a Strong Buy rating in the near term.
APPLE INC (
): Free Stock Analysis Report
GOOGLE INC-CL A (
): Free Stock Analysis Report
To read this article on Zacks.com click here.