The computer giant, Apple (AAPL, Financial), has outshone in the smartphone segment, and that is clearly depicted in its fourth-quarter results which have surpassed all the expectations set by analysts. Shares in Apple rose by 2% in after-hours trading after the results were out on October 20, as investors were encouraged by the consumer electronics giant’s higher-than expected earnings for the fourth quarter. CEO Tim Cook stated during the earnings call, “Our fiscal 2014 was one for the record books, including the biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus.” So, what did the results say about Apple’s future? Is the company’s performance card convincing enough? Let’s dig deeper to get to the answer.
The quarter number mix
The results of Apple’s fourth quarter which ended September 27 were impressive as the computer giant posted quarterly revenue of $42.1 billion compared to $37.5 billion revenue in the year-ago quarter. Gross margins were up by a percent at 38% from 37% in the year-ago quarter. Earnings were at $8.47 billion, which beat analysts’ expectations and represented a 13% increase, compared to the similar period of the previous fiscal year.
Apple attributed the growth in sales to the strong performance seen in the iPhone segment and particularly with iPhone 6. In fact, this new model had been in sale just ten days before the quarter came to a close. The total iPhone sales were mind-boggling standing at 39.3 million at the end of the quarter. EPS grew to about $1.24 per share from $1.18 per share a year back, and this was partially aided by the share repurchase program which helped to reduce the outstanding share count by about 6% since last year.
Future outlook remains positive
The best part in the earnings presentation was the forward earnings projection which remains completely optimistic from the company’s corner. For the holiday quarter, the company projects revenue to be between $63.5 billion and $66.5 billion, and gross margins are estimated to be between 37.5% and 38.5%.
Apple CEO Tim Cook shared, “With amazing innovations in our new iPhones, iPads and Macs, as well as iOS 8 and OS X Yosemite, we are heading into the holidays with Apple’s strongest product lineup ever. We are also incredibly excited about Apple Watch and other great products and services in the pipeline for 2015.”
During the quarterly call, Apple announced that it would introduce new financial reporting methods that lump the Apple iWatch and iPod with Apple TV and other accessories in a new category called “Other” when it reports its first quarter results of fiscal 2015, early next year. In addition, retail sales is to be combined with regional sales, meaning the present retail segment breakout is going to vanish – such as Apple Pay would possibly feature in the Services category of Apple along with iTunes, software and other services.
China remains the core sales region after the U.S.
Remarkably, 60% of the revenue earned has been through international sales in the fourth quarter. The iPhone sales in greater China rose by 32% year-over-year during fiscal Q4, despite the fact that the launch of the new handsets was delayed in the current quarter. As China remains an important region for growing Apple’s sales graph, the company is planning to build more than 25 retail locations in China over the next two years. This is a step to fulfilling the promise of tripling Apple’s footprint in the country.
Cook noted that Apple has 15 stores operating in China, and such a decision would surely boost the company’s official presence in the region. This would in turn translate into extra sales in the region where customers are quality conscious; although Apple products are premium priced in most of the cases, they appeal to the Chinese crowd who will not compromise on quality.
Share price surge continues
The technology giant is on track to surpass its record close of $103.30. On Wednesday morning, the share price moved up stealthily and eventually touched the peak of $104.11 per share, creating a new high and wiping out the company’s previous high of $103.74 in September. This looks pretty interesting for taking new positions in the company from the investment perspective.
But Carl Icahn, the activist investor in Apple, is of the belief that after the results Apple share price should be worth $200 a share, and that the company should dramatically improve its share repurchase program. This news makes Apple, furthermore, an attractive investment option for its investors.
Last note
Cook could relax a bit thinking that he is doing a good job after the great legendary Steve Jobs, as Apple is presently on a fabulous growth trajectory with the shares riding higher creating new historical peaks in the share market. Let’s stay tuned and keep watching how the Apple’s strategies for the future take shape, and how the company is able to keep its dominance intact in the days ahead.
