Review & Outlook

Our take on the investing, financial, & economic themes of the day

Taking Stock of Apple’s Huge 4th Quarter

28 January, 2015 by Matthew O'Brien, Ph.D. in Commentary

The other day I posted on some of the highlights of Apple’s recent quarter, and now that its earnings report is out, we know just how well the company did.  The gist, as the Wall Street Journal reports, is that compared to the previous year Apple sold considerably more iPhones at higher prices and earned more profit on each phone sold.  Thus the company pulled off the triple play of big revenue growth, big profit growth, and growth of its profit margin.

 

  • Apple sold 74.5 million iPhones in the quarter, 46% above a year earlier, while lifting the average selling price of the devices by $50 from the prior year. The total equates to more than 34,000 phones an hour, around the clock.
  • According to Dow Jones, Apple’s huge quarter will lift the whole S&P 500 considerably: “After yesterday morning’s reports, the index members’ 4Q EPS growth was seen being 3.3% as revenue was projected to rise 0.5%, according to Thomson Reuters, combining both companies’ actual results and Street estimates for those which haven’t yet reported. Following AAPL’s after-the-bell beat, those growth projections are now at 4.4% and 1.4%, respectively. If you back out AAPL, S&P 500 earnings are seen rising just 2.3% for the latest quarter, the news-and-data firm notes. Meanwhile, for S&P 500 firms which have reported, earnings growth of 1.8% as of yesterday morning is now 6.5%.”
  • Apple earned a net profit of $18.0 billion for its fiscal first quarter that ended in December.  This was the most profitable quarter for any company, ever, and it was an increase of 38% from the company’s $13.1 billion in profits for the same period in the previous year.  According to S&P Capital IQ, Apple earned in the quarter more than 435 of the companies in the S&P 500 index each made in total profits since 2009.
  • Because Apple has instituted a share-buyback program, which decreases the number of shares outstanding, its earnings-per-share rose even more at 48% compared to the previous year, or $3.06 per share from a split-adjusted $2.07 per share.
  • Overall sales were up 30% to $74.6 billion from $57.6 billion.
  • Although Apple has targeted the premium end of the smartphone market, its success lead it to win back broader market-share from its South Korean competitor, Samsung.

 

As one of our core technology holdings, Apple was the biggest contributor to the performance of many of our clients’ separately managed accounts in 2014.  Here is the stock’s performance (in blue) over the past 52 weeks, compared to the S&P 500 (in red):

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