Tuesday, October 18, 2011

Apple Earnings Stumble on Drop in iPhone Sales! (Charts, Video) *Revenues, net income, EPS down* AAPL


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Apple (AAPL) reported calendar Q3 2011 financial results on October 18, 2011
* Charts and commentary have been updated for Apple calendar Q3 2011 financial results *


Apple Earnings Stumble on Drop in iPhone Sales!: Revenues, net income, EPS down

Apple Financial Summary Calendar Q3 2011 Apple financial performance declined QoQ, even though improving significantly YoY, for one reason: a drop in iPhone sales. The most significant decrease was in the Americas region. CEO Tim Cook and CFO Peter Oppenheimer attributed this to a significant decline in sales in the latter part of the quarter as consumers waited in anticipation of the new iPhone 4S launched in early October (the next quarter). Holiday Q4 is the annual cyclical peak for Apple and with the introduction of the iPhone 4S in the same quarter, a huge rebound in iPhone sales is projected. CFO Oppenheimer is projecting next quarter revenues at $37 billion and earning per share of $9.30. Total revenues, net income, earnings per share, cash flow per share, gross margin, operating margin, and net margin all decreased in calendar Q3 2011. Financial position continues as legendary; total assets are now $116.37 billion, including $81.57 billion in cash and investments.

Apple Income Statement Calendar Q3 2011 Apple reported total revenues of $28.27 billion, net income of $6.62 billion, and earnings per share of $7.05. All 3 were down QoQ and up YoY. From the prior calendar Q2 2011, total revenues were down -1.05%, net income down -9.37%, and earnings per share down -9.50%. From the prior calendar year Q3 2010, these were up +38.97%, +53.74%, and +51.94%, respectively. Margins also decreased QoQ. For calendar Q3 2011, gross, operating, and net margins were 40.25%, 30.81%, and 23.43%, respectively. Cash flow from operations per share decreased QoQ to $11.10 from $11.84. Apple generated a very strong $10.43 billion in cash for the quarter, but slightly down QoQ from $11.11 billion. The operating expense ratio increased slightly QoQ to 9.44% from 8.90%, but is incredibly low for both the technology sector and corporations in general.

Apple Balance Sheet Calendar Q3 2011 Total assets increased a strong +9.00% QoQ to a record $116.37 billion from the prior calendar Q2 2011 of $106.76 billion and prior year Q3 2010 of a "mere" $75.18 billion. The capital to assets ratio (total stockholders' equity divided by total assets) is a rock solid 65.84%. The current ratio (current assets divided by total assets) dipped QoQ to 38.66%, which continues liquid. More current investment assets have been allocated to long-term marketable securities, a noncurrent asset. Apple is very liquid with strong capital. Apple has over $25.95 billion in cash, cash equivalents, and marketable securities. Add long-term marketable securities of $55.62 billion and Apple's cash and investment reserves are a mind-boggling $81.57 billion! Return on assets decreased QoQ to 23.75%, which is historically below average but still very strong.

Apple Outlook Calendar Q4 2011 "Looking ahead to the first fiscal quarter of 2012, which will span 14 weeks rather than 13, we expect revenue of about $37 billion and we expect diluted earnings per share of about $9.30.”

Apple Performance by the Quarters (Charts)

Apple Earnings per Share and Cash Flow per Share (Chart) Below is a chart of quarterly earnings per diluted share and quarterly cash flow from operations per diluted share. Current Earnings per Share of $7.05 decreased -9.50% QoQ and increased +51.94% YoY. Current Cash Flow per Share of $11.01 decreased QoQ and increased YoY. The chart averages for EPS and CFS are $4.32 and $5.95, respectively. Recent chart data is:
Quarter, Earnings per Diluted Share, Cash Flow  per Diluted Share
Sep10: $4.64, $6.12
Dec10: $6.43, $10.47
Mar11: $6.40, $6.64
Jun11: $7.79, $11.84
Sep11: $7.05, $11.10


Apple Total Revenues, Operating Income, and Net Income (Chart) Below is a chart of quarterly total revenues, operating income, and net income. For Q3 2011, all 3 decreased from record-setting totals in Q2 2011. Current Total Revenues of $28.27 billion decreased -1.05% QoQ and increased +38.97% YoY. Current Operating Income of $8.71 billion decreased QoQ and increased YoY. Current Net Income of $6.62 billion decreased -9.37% QoQ and increased +53.74% YoY. The chart averages for TR, OI, and NI are $17.10 billion, $5.02 billion, and $3.78 billion. Recent chart data is:
Quarter, Total Revenues, Operating Income, Net Income
Sep10: $20.3B, $5.4B, $4.3B
Dec10: $26.7B, $7.8B, $6.0B
Mar11: $24.7B, $7.9B, $5.99B
Jun11: $28.6B, $9.4B, $7.3B
Sep11: $28.3B, $8.7B, $6.6B


Apple Gross Margin, Operating Margin, and Net Margin (Chart) Below is a chart of quarterly gross margin, operating margin, and net margin. Current Gross Margin of 40.25% decreased QoQ and increased YoY. This is the 3rd consecutive quarter that gross margin has been above 40%. Current Operating Margin of 30.81% decreased QoQ and increased YoY. This is the 3rd consecutive quarter that operating margin has been above 30%. Current Net Margin of 23.43% decreased QoQ and increased YoY. This is the 9th consecutive quarter that net margin has been above 20%. The chart averages for GM, OM, and NM are 40.09%, 28.92%, and 21.52%, respectively. Recent chart data is:
Quarter, Gross Margin, Operating Margin, Net Margin
Sep10: 36.93%, 26.78%, 21.18%
Dec10: 38.51%, 29.27%, 22.45%
Mar11: 41.42%, 31.92%, 24.27%
Jun11: 41.73%, 32.83%, 25.58%
Sep11: 40.25%, 30.81%, 23.43%

Apple Return on Assets (Chart) Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. Current Return on Assets of 23.75% dipped to a 5-quarter low due to an ongoing increase in total assets and slowing of net income growth. Apple's return on assets continue very strong. The chart average ROA is 25.45%. Limited chart data (due to Change in Accounting Method) is:
Quarter, Quarterly ROA Annualized
Sep10: 24.63%
Dec10: 29.66%
Mar11: 26.37%
Jun11: 28.99%
Sep11: 23.75%

Apple Growth Rates (Chart) Below is a chart of the annual (YoY, Y/Y, annual change) growth rates for revenues and earnings per share. Apple, as with some other technology companies, has an annual cyclical high in Q4 and an annual cyclical low in Q1. Therefore, comparing YoY growth rates best reflects Apple's growth. Apple has been a high growth company and stock and has now become a very large technology company ($116+ billion in total assets and $28+ billion in quarterly total revenues). The YoY growth rates are astounding. Current Total Revenues Growth of +38.97% is historically below average and a 7-quarter low. Current Earnings per Share Growth of +51.94% is historically below average and a 7-quarter low. The chart averages for TRG and EPSG are +60.34% and +77.03%, respectively. Recent chart data is;
Quarter, Total Revenues Change %, Earnings Per Share Change %
Sep10: +66.65%, +67.51%
Dec10: +70.51%, +75.20%
Mar11: +82.73%, +92.19%
Jun11: +81.98%, +121.94%
Sep11: +38.97%, +51.94%

Apple Geographic Revenues (Chart) Below is a chart of geographic revenues by quarter. International revenues accounted for 63% of Apple's total revenues in the latest quarter reported. This is an increase from the 52% reported prior year Q3 2010. Sales in all regions slowed. Americas at $9.65 billion and Japan at $1.11 billion decreased QoQ. Europe at $7.40 billion, Asia Pacific at $6.53 billion, and Retail at $3.58 billion increased QoQ. Noteworthy is the increasing sales in the Asia Pacific region, now 23.1% of total sales compared to 13.4% a year ago. Recent chart data is;
Quarter, Americas, Europe, Asia Pacific, Retail, Japan
Sep10: $7.2B, $5.5B, $2.7B, $3.6B, $1.4B
Dec10: $9.2B, $7.3B, $4.98B, $3.8B, $1.4B
Mar11: $9.3B, $6.0B, $4.7B, $3.2B, $1.4B
Jun11: $10.1B, $7.1B, $6.3B, $3.5B, $1.5B
Sep11: $9.6B, $7.4B, $6.5B, $3.6B, $1.1B
Apple Product Revenues (Chart) Below is a chart of product revenues by quarter. iPhone decreased significantly to $10.98 billion from $13.31 billion. iPad increased againto $6.87 billion from $6.05 billion. Computers increased substantially to $6.27 billion from $5.11 billion. iTunes increased slightly to $3.05 billion from $2.78 billion. iPods dropped again, for the 3rd consecutive quarter, to $1.10 billion from $1.33. iPods may drop below $1 billion by Q1 2012. Recent chart data is;
Quarter, iPhone, iPad, Computers, iTunes Other, iPods
Sep10: $8.8B, $2.8B, $4.9B, $2.4B, $1.5B
Dec10: $10.5B, $4.6B, $5.4B, $2.8B, $3.4B
Mar11: $12.3B, $2.8B, $4.98B, $2.96B, $1.6B
Jun11: $13.3B, $6.0B, $5.1B, $2.8B, $1.3B
Sep11: $10.98B, $6.9B, $6.3B, $3.0B, $1.1B


Apple Operating Expense Ratio (Chart) Below is a chart of the quarterly operating expense ratio, which is operating expenses divided by total revenues. Apple's OER is extremely low, both by technology sector and overall corporate standards. The current Operating Expense Ratio of 9.44% is below the historical average, a slight increase QoQ, and a decrease YoY. This indicates in the current quarter slightly decreased efficiency plus a slightly lower proportion of revenues reaching the bottom line, net income and earnings per share. The chart average OER is 11.17%. Recent chart data is:
Sep10: 10.15%
Dec10: 9.24%
Mar11: 9.50%
Jun11: 8.90%
Sep11: 9.44%



Apple Change in Accounting Method
Note: A change in accounting method to Generally Accepted Accounting Principles - GAAP - materially affects how Apple reports quarterly earnings, therefore, only earnings under the new accounting method are in the charts above, unless so noted.
Apple Official Statement 1: "In September 2009, the Financial Accounting Standards Board amended the accounting principles related to certain revenue recognition. Apple adopted the new accounting principles on a retrospective basis during the first quarter of 2010. The new accounting principles significantly change how Apple accounts for certain items, particularly sales of iPhone and Apple TV. The earnings releases for periods prior to Q1 2010 are presented as originally issued and do not reflect the application of the new accounting principles."
Apple Official Statement 2: "During the quarter (3 months ended December 26, 2009) Apple elected retrospective adoption of the Financial Accounting Standards Board’s amended accounting standards* related to certain revenue recognition. Adoption of the new accounting standards significantly changes how the Company accounts for certain items, particularly sales of iPhone® and Apple TV."


Apple Reports Calendar Third Quarter 2011 Results

CUPERTINO, California - October 18, 2011 - Apple today announced financial results for its fiscal 2011 fourth quarter ended September 24, 2011. The Company posted quarterly revenue of $28.27 billion and quarterly net profit of $6.62 billion, or $7.05 per diluted share. These results compare to revenue of $20.34 billion and net quarterly profit of $4.31 billion, or $4.64 per diluted share, in the year-ago quarter. Gross margin was 40.3 percent compared to 36.9 percent in the year-ago quarter. International sales accounted for 63 percent of the quarter’s revenue.

The Company sold 17.07 million iPhones in the quarter, representing 21 percent unit growth over the year-ago quarter. Apple sold 11.12 million iPads during the quarter, a 166 percent unit increase over the year-ago quarter. The Company sold 4.89 million Macs during the quarter, a 26 percent unit increase over the year-ago quarter. Apple sold 6.62 million iPods, a 27 percent unit decline from the year-ago quarter.

“We are thrilled with the very strong finish of an outstanding fiscal 2011, growing annual revenue to $108 billion and growing earnings to $26 billion,” said Tim Cook, Apple’s CEO. “Customer response to iPhone 4S has been fantastic, we have strong momentum going into the holiday season, and we remain really enthusiastic about our product pipeline.”

“We are extremely pleased with our record September quarter revenue and earnings and with cash generation of $5.4 billion during the quarter,” said Peter Oppenheimer, Apple’s CFO. “Looking ahead to the first fiscal quarter of 2012, which will span 14 weeks rather than 13, we expect revenue of about $37 billion and we expect diluted earnings per share of about $9.30.”

About Apple
Apple's Mission Statement and described in press releases, "Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and has recently introduced iPad 2 which is defining the future of mobile media and computing devices."

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