Coverage: Apple earnings beat estimates, stock nears high

Apple Inc. posted the strongest third quarter in company history, beating analyst expectations for earnings per share and revenue. The beat drove the stock up over 3 percent in extended trading.

Kef Leswig of Business Insider had the news:

However, there were some signs of slowing growth in its key device businesses. iPhone and iPad sales were mostly unchanged from the same period last year. Mac sales were down 13%.

Apple also said that it expected revenue next quarter to be between $60 billion and $62 billion, ahead of Wall Street expectations, which at its midpoint would be a 15% year-over-year increase. The larger-than-expected figure is a strong hint that Apple will introduce a new iPhone in September.

Apple’s “services” business, which includes iCloud, Apple Music, and App Store, rose 31% year over year to $9.54 billion.

Apple also declared a dividend of $0.73 per share. Apple CFO Luca Maestri said on a conference call that the company “returned almost $25 billion to investors through our capital return program during the quarter, including $20 billion in share repurchases.”

Roger Aitken of Forbes.com reported that the quarter is usually the weakest for iPhone sales:

This quarter is usually the least important for iPhone sales. However, do not forget that the iPhone device still accounts for the lion’s share of Apple’s revenues – 62% of sales in Q2 for example. According to Wilson expectations are for sales to be up a “shade at 42 million units” from 41.03 million a year ago. Yet even a miss is “unlikely to matter too much to investors”, according the London-based Scottish analyst.

The focus in terms of sales is very much on the September quarter guidance and demand for the 2019 full year (FY19) as the next line of iPhones comes out. And, shortly we will see if the guidance for Q4 indicates new devices coming out in time to make a difference to the FY18 figures.

Also watch out for the average selling price as the iPhone X has been pushing this higher. In Q2 it was pretty obvious fears that the X would prove too costly were unfounded as it outsold other models in every week of the quarter.

Lower-than-expected average selling prices seems to have been down to clearance of older models. “So, the outlook for average prices would seem to look good going forward based on the solid demand for the more expensive models,” Wilson ventured.

Emily Bary of MarketWatch.com reported that the company projected better-than-expected third quarter revenue:

Arguably the most useful number in Apple’s fiscal third-quarter report was its September-quarter outlook of $60 billion to $62 billion in revenue, which came in above the FactSet consensus for $59.5 billion in revenue. Typically investors look to Apple’s September forecast for indications of whether the company expects to start selling new iPhones before that quarter ends. Given Apple’s revenue outperformance versus the consensus in the current quarter, though, Apple’s optimism could also be due to product mix.

Services revenue has become an increasingly important element of Apple’s business, as it indicates how well the company is able to monetize its installed base of users amid what Tim Cook admitted was a lengthening upgrade cycle. Apple reported $9.5 billion in services revenue for the latest period, up from $7.3 billion in the year-earlier quarter. Analysts had been projecting $9.2 billion.

On the company’s earnings call, Cook shared more information about the services business, and he was prompted by one analyst to discuss Apple’s various streaming efforts. He talked about how Apple’s services segment was getting a boost from increased usage of third-party subscription-video products within the Apple ecosystem.