EMC's Expanding Margins: Fool by Numbers

On Oct. 19, EMC (NYSE: EMC  ) released earnings for its 2005 third quarter, which ended Sept. 30.

  • Sales of $2.37 billion were in line with Street estimates. EPS, however, appeared to blow away analyst projections. Yet that's deceiving because net income included a $0.04 per-stub tax benefit. Still, it's worth noting that even without the benefit, EMC beat estimates by a penny. Pretty much like last quarter.
  • Though year-over-year revenue growth has begun to slow, margins have continued to expand generously. That may be due to a 25% increase in professional services revenue, which tends to carry a healthy markup. It's a good sign regardless.
  • The earnings impact of options continued to wane. Expensing options would have cut EPS by $0.03 during Q3, down from $0.04 during the same period a year ago.

(Figures in thousands, except per-share data)

Income Statement Highlights(What's this?)

Avg. Est.

Q3 2005

Q3 2004

% Change

Sales

$2,370,000

$2,365,742

$2,028,879

+16.6%

Net Profit

--

$421,672

$218,035

+93.4%

EPS

$0.12

$0.17

$0.09

+88.9%



Margin Checkup(What's this?)

Q3 2005

Q3 2004

Change

Gross Margin

54.00%

51.42%

+2.59%

Op. Margin

15.89%

13.31%

+2.58%

Net Margin

17.82%

10.75%

+7.08%



Balance Sheet Highlights(What's this?)

Assets

Q3 2005

Q3 2004

% Change

Cash+ ST Invest.

$4,464,753

$2,450,714

+82.2%

Inventory

$756,245

$547,028

+38.2%

Accounts Rec.

$1,166,175

$950,216

+22.7%



Liabilities

Long-Term Debt

$127,335

$128,832

-1.2%

Accounts Pay.

$517,523

$448,427

+15.4%



Cash Flow Highlights(What's this?)

Q3 2005

Q3 2004

% Change

Cash From Ops

$1,619,249

$1,453,209

+11.4%

Capital Expend.

$540,170

$386,426

+39.8%

Free Cash Flow

$1,079,079

$1,066,783

+1.2%



Related companies:

  • Dell (Nasdaq: DELL  )
  • Hewlett-Packard (NYSE: HPQ  )
  • Hitachi (NYSE: HIT  )
  • IBM (NYSE: IBM  )
  • Network Appliance (Nasdaq: NTAP  )
  • Sun Microsystems (Nasdaq: SUNW  )

For related Foolishness:

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

Dell is aMotley Fool Stock Advisorrecommendation.

The Motley Fool has kicked off its ninth annual Foolanthropy campaign! Nominate your favorite charities on ourFoolanthropy discussion boardthrough Nov. 1. For guidelines on what makes a charity Foolish, visitwww.foolanthropy.com.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Fool profile. The Motley Fool has an ironclad disclosure policy.


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