Tech giant Apple (AAPL -0.57%), the world's largest publicly traded company and by far the most widely discussed stock in the world, reported earnings yesterday.
Source: Apple
What's perhaps most interesting as the dust settles on yet another record-setting earnings release from Apple, is the reaction investors had to report. My Foolish colleague, Evan Niu, described investors reaction to the news as "Meh," and I tend to agree. After idling in after-hours trading, Apple's shares are up more than 2.5% today, but this is relatively quite far from the norm for an Apple's earnings release. Point of fact, Apple's earnings announcements often take on a life of their own in one way or another. Not this time though.
Apple delivers... kind of
Apple's sales narrowly missed estimates, but still set a third quarter record of $37.4 billion. However, Apple exceeded analysts' expectations on the earnings per share, or EPS front, generating $1.28 in earnings per shares on net income of $7.7 billion. All told, Apple's top and bottom line figures were well within 5% of analysts' estimates. Again, no significant surprises here.
Apple's iPhone sales also set a Q3 record with shipments of 35.2, which was again slightly shy of the 35.4 million forecast by analysts, but not enough to truly rattle investors. As widely speculated, iPad sales tallied 13.2 million units, disappointing for a second straight quarter and marking their second straight year over year decline. Mac sales showed surprising strength, raising 18% during the quarter to a total of 4.4 million units sold.
Apple did enjoy a few notable bright spots in its recent report though. Stronger-than-expected gross margins, prudent cost management, and another highly active quarter on the buyback front, all helped translate Apple's 12% increase in net income into a much more impressive 20% surge in EPS. Likewise, sales of the iPhone in emerging Brazil, Russia, India, and China, or BRIC nations, a geography that Apple will increasingly rely on in the years ahead, grew an encouraging 55% as well. Don't get me wrong, this was largely a positive report from Apple, just not the eye-popping kind we've grown accustomed to over the years.
Impatiently waiting for the Fall
Especially since the results proved somewhat muted, this earning report should go down as a somewhat minor blip as investors undoubtedly shift their focus toward Apple's widely anticipated fall product launch schedule. Apple's upcoming series of products have already dominated the discussion regarding Apple this year. And while it very well could seem "played out" at this point, it's also completely understandable.
In terms of product implications, Apple's iPhone 6 is a veritable lock for a form factor overhaul and screen size upgrade. iPhone redesigns always have a way of capturing consumer attention like few other products today, but the iPhone 6's implications span far beyond its design appeal. The iPhone 6 could also prove to be the most impactful financial event Apple's seen in some time. Between Apple's likely pursuit to a two-screen size strategy, which should play especially well in key emerging markets like China, and the increasingly archaic nature of Apple's iPhone installed base, the iPhone 6 is likely to trigger a refreshing cycle on a genuinely massive scale. It's the kind of storyline that should seriously move the need for Apple's financials, and that's saying something for a company the size of Apple. There's also plenty of excited anticipation for whatever new products Apple will release as well this fall, likely an iWatch and who knows what else.
On the Apple's conference call last night, the Apple executive team repeatedly played into the mounting investor interest in Apple's Fall launch cycle. CEO Tim Cook dropped repeated references in that vein, and newly minted CFO Luca Maestri promised investors a "very busy fall." So while Apple's product cycle has, and will, dominate the narrative for the world's largest publicly traded company, it is at least worth noting, however briefly, that we once again saw that things are largely going well at Apple with its recent reports. And with that, it's back to the iPhone 6 and iWatch rumors for Apple investors once more!
