4/25/2012
By Carlos Guillen, Research Analyst

Despite increasing concerns that Apple would not meet expectations during this earnings season, well ... Apple knocked it out of the park once again. And yes, they continue to low ball their forecasts for the next earnings season, always setting up for another earnings surprise.

After the closing bell last night, Apple conveyed that during its second fiscal quarter (the first quarter in 2012) it earned $12.30 per share on revenue of $39.2 billion; both results were way above the Street's consensus estimates calling for earnings of $10.04 per share on revenue of $36.8 billion. The company nearly doubled the earnings achieved in the year-ago quarter, mostly as a result of strong sales on iPhones in China. Apple's revenue from China was $7.9 billion, representing 20 percent of total company revenue and tripling those achieved in same period a year ago. Apple's China sales during its last fiscal year were about 12 percent of total revenue. Two years ago, Apple sales in China were 2 percent.

Overall, the company said it sold 35.1 million iPhones in the quarter, an 88 percent increase from the period a year ago. It sold 11.8 million iPads, more than double the number it sold in the same quarter last year.

It is interesting to note that despite the strong quarterly results, Apple forecasted downside guidance for the following quarter. The company said it expects to obtain earnings of approximately $8.68 on revenue of $34 billion; this was well below the Street's consensus estimate calling for earnings of $9.95 per share on revenue of $37.4 billion. Of course, we should not be surprised by this rather depressed guidance as Apple consistently tends to promise much less than what it delivers, as it is apparent that it likes to set the bar low for an easy beat.

So while many on the Street had been concerned that Apple would miss consensus estimates as a result of slowing sales of iPhone in the U.S. and as a result of what is typically a slow season for iPads and Macs, Apple really took everyone by surprise, posting record March-quarter sales for iPhone, iPad, and Macs. As a result, Apple remains the world's most highly valued company, and its shares are soaring close to 10 percent in early trading.

Carlos Guillen
Wall Street Strategies

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