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Apple (AAPL) Q1 Earnings Beat, iPhone Unit Sales Down Y/Y
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Apple (AAPL - Free Report) reported first-quarter fiscal 2018 earnings of $3.89 per share, which beat the Zacks Consensus Estimate by 7 cents and increased almost 16% year over year. Sequentially, earnings jumped 88.2%.
Net sales increased 12.7% year over year and almost 68% sequentially to $88.29 billion, which comfortably surpassed the Zacks Consensus Estimate of $86.29 billion. Apple benefited from robust iPhone and Services segment revenue growth.
Apple quoted Canalys data according to which iPhone X was the best-selling smartphone in the world in the reported quarter. According to Apple, the device has been its top-selling phone every week since launch in November 2017.
However, iPhone unit sales of 77.3 million missed the Zacks Consensus Estimate of 79.8 million. Apple Services (9.6% of sales) revenues of $8.47 billion also missed the consensus estimate of $8.65 billion.
Management stated that active installed base for all devices reached 1.3 billion in January, which is a record in the company’s history. The number of devices represents an astonishing 30% growth in only two years.
iPhone ASP Jumps
Total iPhone unit sales declined 1% year over year but surged 66% sequentially. Average weekly iPhone sales were up 6% year over year with growth in every region globally.
Revenues from iPhone (69.7% of sales) grew 13% from the year-ago quarter and 113% sequentially to $61.58 billion. This upside can be attributed to higher iPhone average selling price (ASP), which increased to $796 from $695 a year ago.
Services Paid Subscribers Increase
Services — including revenues from Internet Services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services — increased 18% year over year but was flat sequentially. Average revenues per week improved 27% year over year.
The number of paid subscribers grew 30 million to a total of 240 million in the last three months (October-December 2017), up 58% year over year. The company is on track to double Services revenues of $24 billion in fiscal 2016 by 2020.
Apple Pay adoption jumped 50% on a year-over-year basis among merchants. The payment app is now available in 20 markets and global purchase volume more than tripled year over year in the quarter. In December 2017, the company launched Apple Pay in the United States.
iPad, Mac & Other Segment Details
Apple sold 13.2 million iPads in the quarter, up 1% year over year and 28% sequentially. Almost half of iPad sales were to first-time tablet buyers. Apple stated that in China, new and switching users made up more than 70% of all iPad sales.
Revenues (6.6% of sales) of $5.86 billion increased 6% year over year and 21% sequentially. Average iPad sales per week increased 8% year over year.
Apple Mac (7.8% of sales) unit sales declined 5% year over year as well as sequentially to 5.1 million. The company launched iMac Pro in December, 2017. Globally, 60% of the Mac sales were first time buyers and switchers, while in China that number was almost 90%.
Nevertheless, Mac revenues fell 5% from the year-ago quarter and 4% sequentially to $6.89 billion. However, average sales per week increased 2% from the year-ago quarter. Unit sales were up 13% year-over-year, with all-time records in Latin America, India, Turkey, Central and Eastern Europe. Globally, active install base of Macs increased double-digits on a year-over-year basis.
Other products — including revenues from Apple TV, Apple Watch, Beats products, iPod, and Apple-branded and third-party accessories — increased 36% year over year and 70% sequentially to $5.49 billion.
Wearables Robust Performance
Apple Watch unit and revenues grew 50% year over year, for the fourth consecutive quarter. The company experienced strong double-digit growth in all geographic segments. Per IDC data, Apple Watch gained market share during the quarter.
Moreover, total revenues from wearables increased almost 70% year over year. It was the second largest contributor to revenue growth after the iPhone.
Geographical Performance
Demand for Apple’s products improved across most of the geographical regions. Apple stated that 65% of the sales were from the International markets.
The Americas (39.9% of sales) generated revenues of $35.19 billion in the quarter, up 10.1% year over year and 52.4% sequentially.
Europe (23.8% of sales) generated $21.05 billion in revenues, up 13.7% on a year-over-year basis and 61.8% sequentially.
Greater China (20.3% of sales) increased 10.6% from the year-ago quarter and 83.2% sequentially to $17.96 billion. Revenues from emerging markets outside of Greater China jumped 25%.
Revenues from Japan (8.2% of sales) surged 25.5% year over year and 87.6% sequentially to $7.24 billion.
Rest of Asia Pacific (7.8% of sales) generated revenues of $6.85 billion, up 16.9% year over year and n143.7% from the previous quarter.
Operating Details
Gross margin contracted 10 basis points (bps) on a year-over-year basis to 38.4%, which was within management’s estimate of of 38-38.5%.
Operating expenses increased 12% year over year to $7.64 billion due to higher research & development (R&D) expenses and selling, general and administrative (SG&A) expenses, up 18.7% and 7.2%, respectively. The operating expense figure was slightly lower than management’s estimate of $7.65–$7.75 billion.
Operating margin was flat at 29.8%.
Balance Sheet & Cash Flow
As of Dec 30, 2017, cash & marketable securities were $285.1 billion, up $16.2 billion sequentially. Apple stated that 94% of this amount — $269 billion of cash — was outside the United States.
Apple issued $7 billion in debt during the quarter. As of Dec 30, 2017, term-debt was $110 billion and commercial paper outstanding was $12 billion.
Apple returned about $14.5 billion in the first quarter through dividends ($3.3 billion) and share repurchases ($5.1 billion). The company has now returned $248 billion to shareholders out of its $300 billion capital return program.
Guidance
For second-quarter fiscal 2018, revenues are projected between $60 billion and $62 billion. The Zacks Consensus Estimate is at $65.44 billion.
Gross margin is expected within 38-38.5%, while operating expenses are projected within $7.6-$7.7 billion. Other income/(expense) is estimated at $300 million, while tax rate is expected to be 15%.
Long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected at 10%, 14.9% and 25%, respectively.
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Apple (AAPL) Q1 Earnings Beat, iPhone Unit Sales Down Y/Y
Apple (AAPL - Free Report) reported first-quarter fiscal 2018 earnings of $3.89 per share, which beat the Zacks Consensus Estimate by 7 cents and increased almost 16% year over year. Sequentially, earnings jumped 88.2%.
Net sales increased 12.7% year over year and almost 68% sequentially to $88.29 billion, which comfortably surpassed the Zacks Consensus Estimate of $86.29 billion. Apple benefited from robust iPhone and Services segment revenue growth.
Apple quoted Canalys data according to which iPhone X was the best-selling smartphone in the world in the reported quarter. According to Apple, the device has been its top-selling phone every week since launch in November 2017.
However, iPhone unit sales of 77.3 million missed the Zacks Consensus Estimate of 79.8 million. Apple Services (9.6% of sales) revenues of $8.47 billion also missed the consensus estimate of $8.65 billion.
Apple Inc. Price, Consensus and EPS Surprise
Apple Inc. Price, Consensus and EPS Surprise | Apple Inc. Quote
Management stated that active installed base for all devices reached 1.3 billion in January, which is a record in the company’s history. The number of devices represents an astonishing 30% growth in only two years.
iPhone ASP Jumps
Total iPhone unit sales declined 1% year over year but surged 66% sequentially. Average weekly iPhone sales were up 6% year over year with growth in every region globally.
Revenues from iPhone (69.7% of sales) grew 13% from the year-ago quarter and 113% sequentially to $61.58 billion. This upside can be attributed to higher iPhone average selling price (ASP), which increased to $796 from $695 a year ago.
Services Paid Subscribers Increase
Services — including revenues from Internet Services, App store, Apple Music, AppleCare, Apple Pay, and licensing and other services — increased 18% year over year but was flat sequentially. Average revenues per week improved 27% year over year.
The number of paid subscribers grew 30 million to a total of 240 million in the last three months (October-December 2017), up 58% year over year. The company is on track to double Services revenues of $24 billion in fiscal 2016 by 2020.
Apple Pay adoption jumped 50% on a year-over-year basis among merchants. The payment app is now available in 20 markets and global purchase volume more than tripled year over year in the quarter. In December 2017, the company launched Apple Pay in the United States.
iPad, Mac & Other Segment Details
Apple sold 13.2 million iPads in the quarter, up 1% year over year and 28% sequentially. Almost half of iPad sales were to first-time tablet buyers. Apple stated that in China, new and switching users made up more than 70% of all iPad sales.
Revenues (6.6% of sales) of $5.86 billion increased 6% year over year and 21% sequentially. Average iPad sales per week increased 8% year over year.
Apple Mac (7.8% of sales) unit sales declined 5% year over year as well as sequentially to 5.1 million. The company launched iMac Pro in December, 2017. Globally, 60% of the Mac sales were first time buyers and switchers, while in China that number was almost 90%.
Nevertheless, Mac revenues fell 5% from the year-ago quarter and 4% sequentially to $6.89 billion. However, average sales per week increased 2% from the year-ago quarter. Unit sales were up 13% year-over-year, with all-time records in Latin America, India, Turkey, Central and Eastern Europe. Globally, active install base of Macs increased double-digits on a year-over-year basis.
Other products — including revenues from Apple TV, Apple Watch, Beats products, iPod, and Apple-branded and third-party accessories — increased 36% year over year and 70% sequentially to $5.49 billion.
Wearables Robust Performance
Apple Watch unit and revenues grew 50% year over year, for the fourth consecutive quarter. The company experienced strong double-digit growth in all geographic segments. Per IDC data, Apple Watch gained market share during the quarter.
Moreover, total revenues from wearables increased almost 70% year over year. It was the second largest contributor to revenue growth after the iPhone.
Geographical Performance
Demand for Apple’s products improved across most of the geographical regions. Apple stated that 65% of the sales were from the International markets.
The Americas (39.9% of sales) generated revenues of $35.19 billion in the quarter, up 10.1% year over year and 52.4% sequentially.
Europe (23.8% of sales) generated $21.05 billion in revenues, up 13.7% on a year-over-year basis and 61.8% sequentially.
Greater China (20.3% of sales) increased 10.6% from the year-ago quarter and 83.2% sequentially to $17.96 billion. Revenues from emerging markets outside of Greater China jumped 25%.
Revenues from Japan (8.2% of sales) surged 25.5% year over year and 87.6% sequentially to $7.24 billion.
Rest of Asia Pacific (7.8% of sales) generated revenues of $6.85 billion, up 16.9% year over year and n143.7% from the previous quarter.
Operating Details
Gross margin contracted 10 basis points (bps) on a year-over-year basis to 38.4%, which was within management’s estimate of of 38-38.5%.
Operating expenses increased 12% year over year to $7.64 billion due to higher research & development (R&D) expenses and selling, general and administrative (SG&A) expenses, up 18.7% and 7.2%, respectively. The operating expense figure was slightly lower than management’s estimate of $7.65–$7.75 billion.
Operating margin was flat at 29.8%.
Balance Sheet & Cash Flow
As of Dec 30, 2017, cash & marketable securities were $285.1 billion, up $16.2 billion sequentially. Apple stated that 94% of this amount — $269 billion of cash — was outside the United States.
Apple issued $7 billion in debt during the quarter. As of Dec 30, 2017, term-debt was $110 billion and commercial paper outstanding was $12 billion.
Apple returned about $14.5 billion in the first quarter through dividends ($3.3 billion) and share repurchases ($5.1 billion). The company has now returned $248 billion to shareholders out of its $300 billion capital return program.
Guidance
For second-quarter fiscal 2018, revenues are projected between $60 billion and $62 billion. The Zacks Consensus Estimate is at $65.44 billion.
Gross margin is expected within 38-38.5%, while operating expenses are projected within $7.6-$7.7 billion. Other income/(expense) is estimated at $300 million, while tax rate is expected to be 15%.
Zacks Rank & Stocks to Consider
Apple carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Micron Technology (MU - Free Report) , Lam Research (LRCX - Free Report) and The Trade Desk (TTD - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected at 10%, 14.9% and 25%, respectively.
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
Click here to access these stocks >>