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Morning Commentary

How ‘Bout that Apple?

By Charles Payne, CEO & Principal Analyst
8/2/2017 9:46 AM
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Question of the Week

Apple is sitting on $262 billion dollars found in offshore banks. Should the company bring back some of that cash, putting patriotism over slightly lower profit margins?

Your Thoughts.


Post your answer below.

It was an impressive market on Tuesday that could have seen a recent weakness in NASDAQ bring down the Dow Jones Industrial Average. Instead, blue chips continued to hold up nicely once again. It was led by financials; this time, it was big banks such as Citigroup (C), Bank of America (BAC) and JPMorgan Chase & Co. (JPM). Meanwhile, the NASDAQ found its footing and led with Xerox (XRX) that climbed into the closing bell.  Okay, so Xerox isn’t the kind of stock with coattails; however, I am impressed with its multi-year stealth rally. 

The move in Apple (AAPL) actually had a greater influence as investors jumped on the bandwagon ahead of the earnings announcement after the close. Those investors were not disappointed. After the closing bell, Apple posted its revenue of $45.4 billion (+7%) from a year earlier, their earnings per share were $1.67 (+15%) year to year, and 10 cents above Wall Street consensus. It was the internals and guidance that popped the shares higher.

We saw the pricing power in iPhones and Macs, and a record quarter for service revenue, which climbed to $7.3 billion (+22%) from a year ago.  This adds credence to its management’s goal of growing services 100% by 2020.  Even iPad sales were impressive with a net unit growth after a massive decline in unit and revenue from a year ago basis in the prior quarter.

Products & Services

Units

Change

Revenue

Change

iPhones

41,026

+2%

$24.8

+3%

iPads

11,424

+15%

$5.0

+2%

Macs

4,292

+1%

$5.6

+7%

Service

N/A

N/A

$7.3

+22%

 

The only red flag was a 9.5 decline in Greater China’s revenue of $8.0 billion. Overall, Asia was strong as the growth in the Americas.  The international revenue was 61% of the total.  Apple continues to confound its critics.

By the same token, Apple success continues to generate criticism and debate over its role as a good corporate citizen.  Management has returned $11.7 billion to shareholders during the quarter, bringing its cumulative return to $223 billion. Meanwhile, the company is sitting on $262 billion, most of it offshore, and Tim Cook says they have no plants to build factories in the United States.

The company will invest in businesses, particularly app businesses. They are not the kind of investments that puts the masses to work. 

Dirty-Fingernail Rally Update

Manufacturing data from the Institute for Supply Management (ISM) showed July holding up better than expected and hanging near June’s number, which was the highest in three years.  Manufacturing has extended its growth expansion for 11-months and could be on the verge of a major leg higher.

United States ISM Purchasing Managers Index (PMI)

According to the ISM, 15 out of the 18 manufacturing industries reported growth in July:

With technology and industrials moving in the same direction at the same time, we have a perfect economic momentum coupled with an upside stock market bias going into the July jobs report.

Today’s Sesssion

There’s a fair amount of mainstream media scuttlebutt over the White House being close to take trade action against China.  While investors have welcomed Donald Trump’s presidency with open arms, their greatest fear is a potential trade war.  I don’t think that would happen, but there will be some action after campaign promises and saber-rattling. 

There should be action to balance the playing field, but not a full fledged trade war that at the end would have no winners. 


Comments
F#*" apple never bought any of there crap for this reason ,I am a small business owner and am getting hammered by the government ,why should apple and there crony's profit on my back

Chet chambers on 8/2/2017 9:54:13 AM
Charles, I look forward to your commentary daily! I sure miss you on Fox Business! In fact, I haven't been watching since you have gone. Please get back soon. I'm sure I am not the only one who doesn't bother watching at this point. You and Dobbs are two of the best!!

Cynthia on 8/2/2017 10:12:39 AM
I'd love to see Apple and others bring cash into the US from overseas. Right now it's too expensive though. It could be changed into a "free" stimulus program if the gov't acted smartly - uncertain for that to happen. I'd like to see a 6 month tax moratorium on cash brought into the US, with conditions along these lines:
- at least 20% paid to shareholders as a special dividend
- at least 50% earmarked and used (and monitored) for "investment in the business through spending in the US"
- none of it could be paid (given?!) to executives or board members of the company


Mike H on 8/2/2017 10:12:48 AM
Mr. Payne you are sorely missed on FBN. As for APPL they should do what's best for their company business. We America should do what's best for our business by attracting APPL and all other businesses.

Roy Orem on 8/2/2017 10:47:05 AM
Play a game of chicken with congress and wait until they blink by making tax reform a reality, including a repatriation tax cut!

kev on 8/2/2017 10:58:33 AM
It is APPLES money ---- In real terms they should be able to bring it HOME to the USA w/no tax....... it is not DC's money. Then spend it however ----- let the chips fall where they may.

john on 8/2/2017 11:16:08 AM
Always appreciate your insight, Charles. I too miss you on Making Money WITH CHARLES PAYNE on Fox Bidness. I sincerely hope your matter is resolved successfully and you can return to your TV role.

Gregory on 8/2/2017 12:33:24 PM
At least 50% should be brought home to US.

ed LalOR on 8/2/2017 2:53:46 PM
I agree wholeheartedly with the above comments. Especially, about you being missed on FBN Charles. Wish you well and a quick return.


AJ on 8/2/2017 5:13:13 PM
China has been at a trade war with us for 50 years we need to recognize that.

Ken Knight on 8/2/2017 6:15:03 PM
 

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