Why Apple Earnings Are Pushing the Shares to a New High

Apple Inc. (NASDAQ: AAPL) reported third fiscal quarter 2017 results after markets closed on Tuesday. For the quarter, the technology giant posted quarterly diluted earnings per share (EPS) of $1.67 on revenues of $45.4 billion. In the same period a year ago, the company reported EPS of $1.42 on revenues of $42.36 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $1.57 and $44.89 billion in revenues.

Consensus estimates for the September quarter are $1.81 EPS and revenues of $49.21 billion — but Apple’s money quarter is the December quarter and estimates are all the way up at EPS of $3.81 (versus $3.36 in 2016) and $85.61 billion in revenues (versus $78.35 billion in 2016).

Cash and equivalents totaled $18.57 billion and short-term marketable securities total $58.19 billion.

Apple international revenues fell sequentially in every segment. European sales were down 16% to $10.68 billion, Greater China sales fell 25% to $8 billion, sales in Japan dipped 19% to $3.62 billion, and the remainder of Asia/Pacific saw sales fall 28% to $2.27 billion. U.S. sales fell 4% sequentially to $20.37 billion.

The company declared a dividend of $0.63 per share on 5.23 billion shares. The company paid a total of $9.5 billion in dividends in the June quarter and repurchases $25.11 billion in common stock.

Apple sold 41.03 million iPhones in the quarter, up from 40.4 million in the same period last year. Sequentially unit sales dropped by 19% from 50.76 million and iPhone revenues dropped by 25% to $24.85 billion.

iPad unit sales rose 28% sequentially and 15% year over year to 11.42 million. This was the big surprise in the report, even though iPad revenue is only about $5 billion, or 20% of iPhone sales. Services sales rose 22% year over year and 3% sequentially to $7.27 billion.

CEO Tim Cook said, “With revenue up 7 percent year-over-year, we’re happy to report our third consecutive quarter of accelerating growth and an all-time quarterly record for Services revenue.”

For the fourth quarter of 2017 Apple said it expects to post revenues in a range of $49 to $52 billion with a gross margin of between 37.5% and 38%. Operating expenses are pegged between $6.7 and $6.8 billion while other income is tabbed at $500 million.

Apple shares closed at $150.05 on Tuesday, up about 0.9% for the day, and traded at around $157.72, up about 5.1%, in the after-hours session and a new high if it holds in Wednesday’s trading. The stock’s 52-week range is $102.53 to $156.65. Thomson Reuters had a consensus analyst price target of $160.75 before Tuesday’s report. That consensus analyst target was $158.95 a month ago, was $156.96 two months ago, and it was $149.93 three-months ago.

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