Why Apple Earnings Did Not Live Up to the Hype

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Apple Inc. (NASDAQ: AAPL) reported fiscal fourth-quarter financial results after markets closed on Tuesday. This quarter had a couple of factors that played into it that had investors expecting more. First, Samsumg’s debacle with its Galaxy 7 had some fallout and definitely contributed to some Apple sales. Second, the iPhone 7 series was released but according to the numbers it was somewhat underwhelming compared to last year.

The company posted $1.67 in earnings per share (EPS) and $46.9 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $1.65 in EPS on $46.89 billion in revenue. The same period from last year had $1.96 in EPS and $51.5 billion in revenue.

In terms of its products, Apple reported its quarterly numbers as:

  • iPhones sold 45.5 million units for total revenues of $28.16 billion. The same period last year had revenues of $32.2 billion and shipped 48.0 million units.
  • iPads sold 9.27 million units for total revenues of $4.26 billion.
  • Macs sold 4.89 million units for total revenues of $5.74 billion.
  • Service revenues totaled $6.32 billion.
  • Other product revenues totaled $2.37 billion.

As for guidance, the company expects revenues in the range of $76 billion to $78 billion, with a gross margin in the range of 38% to 38.5% in the fiscal first quarter. The consensus estimates are calling for $3.19 in EPS and $74.98 billion in revenue.

The board of directors has declared a cash dividend of $0.57 per share of common stock. The dividend is payable on November 10, to shareholders of record as of the close of business on November 7. Apple has returned $9.3 billion to investors through dividends and share repurchases during the quarter and has now completed over $186 billion of its capital return program.

Tim Cook, CEO of Apple, commented:

Our strong September quarter results cap a very successful fiscal 2016 for Apple. We’re thrilled with the customer response to iPhone 7, iPhone 7 Plus and Apple Watch Series 2, as well as the incredible momentum of our Services business, where revenue grew 24 percent to set another all-time record.

The company generated $16.1 billion in operating cash flow, a new record for the September quarter. On the books, cash, cash equivalents, and marketable securities totaled $67.2 billion at the end of the quarter, versus $41.6 billion at the end of the previous fiscal year.

Shares of Apple closed Tuesday up 0.5% at $118.25, with a consensus analyst price target of $128.81 and a 52-week trading range of $89.47 to $123.82. Following the release of the earnings report, the stock was down 2.4% at $115.41 in the after-hours trading session.

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