Apple Inc. (AAPL) iPhone Sales, Margin Stability Positive: W. Blair

Apple Inc. (NASDAQ:AAPL) reported strong fiscal third quarter 2013 results and guidance for the September quarter, in line with the consensus estimate. In the second quarter, earnings per share came in at $7.47, a decline of 20 percent year over year but above the expectation of analysts by $0.29 and $0.13 respectively.

Apple Inc. (AAPL) iPhone Sales, Margin Stability Positive: W. Blair

Apple Inc. (NASDAQ:AAPL)’s stock performed better than the expectations due to growth drivers such as sales, gross margin, operating expenses, and a lower than expected share count. However, declining ‘other income’ and higher taxes brought down profit to some extent, says a report from William Blair by analysts Anil Doradla and Brian Nugent.

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iPhone sales biggest surprise

The analysts’ report noted that iPhone sales were the biggest surprise in the quarter. Revenue from iPhone sales accounted for $2.8 billion upside, whereas non-iPhone revenue was $2.5 billion below estimates. Apple Inc. (NASDAQ:AAPL) shipped 31.2 million iPhones, an increase of 4.8 million over the average estimates year over year.

Analysts at William Blair stated that shipments of 31.2 million iPhone were above the expectations, backing increase in sales and gross margin. However, all other segments performed below expectations.

Total sales for iPads came in at 14.6 million units, a decline of 14 percent year over year for the first time in the product line. Shipments came down 3 percent year over year, which was in line with the expectation of management, but below the Street, after adjusting for channel inventory

Mac performance in line

Apple Inc. (NASDAQ:AAPL)’s Mac sales totaled 3.8 million, a decline of 7 percent year over year but better than the general PC market decline of 11 percent. Apple is set to launch Macbook Air in June and Mac Pro in coming quarters due to which channel inventories declined below the target range. ASP increased 6 percent year-over-year, consistent with the past couple of quarters.

Apple margin narrows but beats expectations

Apple Inc. (NASDAQ:AAPL) posted a gross margin of 36.9 percent decline of 60 basis points sequentially, but more than the expectations by 30 basis points. The decline in margins was due to lower iPhone sales and slightly due to price reductions in iPhone. For the September quarter, management expects gross margin in the range of 36 percent to 37 percent. Operating expenses came in at $3.82 billion.  Apple Inc. (NASDAQ:AAPL) repurchased $16 billion of stock.

September quarter guidance

For the September quarter, revenue is expected to come in at $34 billion to $37 billion, which is $1.6 billion less than the average estimates. Earnings per share guidance are estimated to be $7.44 compared to previous consensus of $7.95.