Fourth Quarter Earnings Results for Apple

Apple (News - Alert) has announced the results of its fourth quarter earnings for the 2014 fiscal year. At the start of Monday's trading day, the day quarterly results were announced, Apple shares were up 1.57 percent to $99.20. Earlier this year, Apple posted earnings of $1.28 per share for Q3, which surpassed speculation of $1.23 per share.

For this quarter, the consensus estimate called for Apple to report earnings of about $1.31 per share on revenue of $39.85 billion. Fourth quarter 2013 results had Apple posting earnings of $1.18 per share, which beat the consensus estimate of $1.14 per share. Revenue totaled $37.472 billion, which beat analysts' estimate of $36.926 billion.

Although previous quarters were not as energetic as investors had hoped for, Apple seems to have made up some ground with its fourth quarter results. The surprise was posted earnings of $8.5 billion on revenue of $42.1 billion. One of the main factors was the calculated risk of changing the size and shape of the iPhone.

The iPhone 6 and 6 Plus went on sale 10 days before the end of the quarter. Even though this was less than a two week period, Apple’s profits were greatly helped by the sale of the new iPhone models. Total iPhone sales hit the 39.2 million mark. This represents about a 16 percent increase from fourth quarter 2013 results which came in at 33.8 million.

This allowed the numbers to come in even higher than Apple had estimated for this quarter. The expectation from Apple was that revenue would be between $37 and $40 billion. Analysts on Wall Street speculated that Apple’s earning would be on the higher end of this spectrum, coming in somewhere around $39.85 billion.

According to Apple’s earnings report, the company posted quarterly revenue of $42.1 billion and quarterly net profit of $8.5 billion, or $1.42 per diluted share. These results compare to revenue of $37.5 billion and net profit of $7.5 billion, or $1.18 per diluted share, in the year-ago quarter. Gross margin was 38 percent compared to 37 percent in the year-ago quarter. International sales accounted for 60 percent of the quarter’s revenue.

In a statement accompanying the earnings report, Tim Cook, Apple’s CEO, made the following comments, “Our fiscal 2014 was one for the record books, including the biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus. 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.”

You will notice that Cook mentioned amazing innovations in iPhones, iPads and Macs, unfortunately, the truth of the matter is that iPad sales came up short. Apple sold 12.3 iPads, which represents about a 15 percent drop from last year’s 14.1 million units. Apple’s expectations were higher, as the company expected to sell about 13.1 million iPads.

On the other hand, while the sale of most personal computers is generally down, the Mac has had a landmark quarter. Sales continue to grow as, depending on which report you look at, for the first time ever, Apple moved to the top five with respect to worldwide sales. The fourth quarter numbers show that Apple sold 5.52 million Macs, which far exceeded the 4.85 million that Apple predicted.

Luca Maestri, Apple’s CFO, said “Our strong business performance drove EPS growth of 20 percent and a record $13.3 billion in cash flow from operations in the September quarter. We continued to execute aggressively against our capital return program, spending over $20 billion in the quarter and bringing cumulative returns to $94 billion.”

The following will give you an idea of what Apple is expecting and hoping to see for its fiscal 2015 Q1:

• revenue between $63.5 billion and $66.5 billion
• gross margin between 37.5 percent and 38.5 percent
• operating expenses between $5.4 billion and $5.5 billion
• other income/(expense) of $325 million
• tax rate of 26.5 percent

According to Cook, there are still things to look forward to in Apple’s future. Apple has never been a company to announce everything that it is working on, so it typical fashion, when asked what lies ahead Cook responded by saying, "We’ve already announced two new categories in the past 90 days. To the degree I can keep it in the cone of silence, I will."