Apple Tops Q2 Estimates Despite Lower Profit; Stock Climbs on Dividend Raise, Buyback Plan


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Apple (NASDAQ: AAPL ) released its highly anticipated fiscal second-quarter results on Tuesday after the closing bell.

The company reported a lower profit for the period, but sales were up by more than 11 percent. Margins fell sharply in the second-quarter, but investors are pushing the stock higher after the company raised its dividend and announced a large share buyback program.

Apple also provided sales guidance for the third-quarter which is well-below analysts' consensus estimates. The light forecast, however, should not come as a surprise to Wall Street as Apple is well-known for its conservative guidance. The stock was last trading up around 5 percent to $427 in the after-hours session.

Net income for the second-quarter fell 18 percent to $9.5 billion or $10.09 per share, compared to $11.6 billion or $12.30 per share, in last year's corresponding quarter. This beat Wall Street consensus estimates of $10.07 per share by a whisker.

Total sales for the second-quarter were $43.60 billion from $39.19 billion last year. This also came in just ahead of analysts' consensus estimates of $42.59 billion.

The lower profit in the period despite a better than 11 percent sales jump was due to shrinking margins amid rising competition in the smartphone and tablet markets. Gross margin plunged to 37.5 percent from 47.4 percent in last year's second-quarter.

iPhone sales in the quarter rose to 37.4 million units from 35.1 million a year ago. The company sold 19.5 million iPads in the quarter, a better than 65 percent gain in unit sales. Mac sales came in at just under 4 million versus 4 million Mac sales in last year's second-quarter.

We are pleased to report record March quarter revenue thanks to continued strong performance of iPhone and iPad," said Tim Cook, Apple's CEO. "Our teams are hard at work on some amazing new hardware, software and services, and we are very excited about the products in our pipeline."

The company said that its cash position climbed to a record $145 billion and announced a 15 percent increase in its quarterly dividend to $3.05 per share. Apple also authorized a $50 billion increase in its existing $10 billion share buyback program.

Overall, the Cupertino, California technology giant is more than doubling its capital return program and also said that it will borrow money to increase returns to shareholders.

Apple said that more details on its plans will be released in the near future. Apple also expects to spend around $1 billion annually to net-share-settle vesting restricted stock units.

"We are very fortunate to be in a position to more than double the size of the capital return program we announced last year," said Tim Cook, Apple's CEO. "We believe so strongly that repurchasing our shares represents an attractive use of our capital that we have dedicated the vast majority of the increase in our capital return program to share repurchases."

Looking ahead to the fiscal third-quarter, Apple guided for revenue of $33.5 billion to $35.5 billion and gross margins of 36 percent to 37 percent. This is well below current Wall Street consensus sales estimates of $39.34 billion. Operating expenses are expected to be between $3.85 billion and $3.95 billion.

While the company's guidance is well below expectations, investors have come to expect this from Apple and are largely discounting the company's Q3 forecast.

(c) 2013 Benzinga does not provide investment advice. All rights reserved.

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This article appears in: Investing , US Markets

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