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Apple Goes 4-for-4 When It Matters Most

By Rick Munarriz - Apr 23, 2013 at 5:35PM

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Apple didn't have a perfect report, but it was more than enough to address near-term concerns.

Well, that wasn't so bad, Apple (AAPL 2.54%) investors. Shares of the consumer-tech giant are climbing higher after the company posted reasonable quarterly results.

Let's not give the Cupertino giant a free pass here, though. Guidance for the current quarter is a disaster. Apple's revenue outlook is a lot worse than the already substantial sequential dip that analysts were forecasting. If we go by the fresh top-line guidance and Apple's call for continued margin contraction, we're eyeing earnings in the vicinity of $7 a share for the new quarter, well short of both the $9.08 a share Wall Street was targeting and the $9.32 it posted a year earlier.

Apple has problems -- and they're not getting any better. However, the market is generally relieved that the company's fiscal second quarter that ended last month wasn't as bad as it could've been.

On Monday, I noted four things that could go right with this quarterly report. Apple went 4-for-4 on the day. Let's quickly review.

1. Earnings can beat expectations -- for a change
Pessimism got the better of analysts who were whittling down their bottom-line estimates leading up to the report. Apple's net income of $10.09 a share would've missed a week earlier, but it was just enough to land the tech bellwether ahead of where the pros were parked this week.

2. Revenue growth can beat expectations
Apple's revenue climbed 11% to $43.6 million. This kind of growth would've been embarrassing in previous years, but Wall Street was bracing for a top-line uptick of less than 9%. It's easy to see why the market wasn't hopeful. Related companies that reported in recent days had some unsettling news.

  • Verizon (VZ -0.20%) revealed that just half of the 4 million iPhones it sold during the first three months of this year were iPhone 5s. The balance were cheaper iPhone 4 and iPhone 4S models that naturally reduce Apple's average selling price.
  • Cirrus Logic (CRUS 3.77%) took a hit after posting uninspiring financials, warning of a net inventory reserve. Cirrus Logic provides audio chips for Apple products, so weakness at Cirrus Logic was parlayed into concerns for Apple.
  • Nokia (NOK 3.28%) also tumbled after posting weak sales of wireless products. Yes, Nokia can be rightfully identified as the competition, but the fear was that folks just weren't buying any smartphones. That didn't apply to Apple and the 37.4 million iPhones it did sell.

3. Apple can raise its dividend
Finally! For the first time since initiating a payout policy last March, Apple is boosting its payouts. The new rate of $3.05 a share is a 15% improvement, pushing the stock's yield up to 3% based on Tuesday night's close.

Apple also increased its share-repurchase authorization from $10 billion to $60 billion. Good luck getting in Apple's way when it hits the open market to buy back its battered stock.

4. You can't spell "innovation" without an ovation
Apple naturally didn't "one more thing" its way into introducing new products during the quarterly report. No one was expecting that.

"If there has ever been a time for Apple to tease about its future products, it would have to be at a time when the world is ready to write off Apple as it cranks out its quarterly financials on Tuesday afternoon," I wrote on Monday.

Well, Apple's earnings release did offer a glimmer of hope without specifics.

"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," CEO Tim Cook said.

To keep this long-overdue rally in the shares going, let's hope that Cook's pipeline is close to the point where it can begin gushing.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$149.24 (2.54%) $3.70
Nokia Corporation Stock Quote
Nokia Corporation
NOK
$5.04 (3.28%) $0.16
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
VZ
$48.94 (-0.20%) $0.10
Cirrus Logic, Inc. Stock Quote
Cirrus Logic, Inc.
CRUS
$81.28 (3.77%) $2.95

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