Apple (AAPL) Posts Record Sales, Easily Beats Estimates

Apple Inc. (AAPL) posted record revenues in the quarter that ended on Dec. 31, 2020, which is the first quarter of the company’s fiscal year 2021, beating analysts’ estimates as well as representing large year-over-year gains. Earnings per share (EPS) were $1.68, 19.1% better than the consensus estimate of $1.41 and 34.4% greater than the figure of $1.25 earned in the same period a year earlier.  

Total revenue was $111.44 billion, beating the consensus estimate of $103.28 billion by 7.9% and representing an increase of 21.4% over the figure of $91.82 billion booked in the same period a year ago. This is the first time that Apple has reported $100 billion or more in quarterly sales. 

  • Apple released earnings for the first quarter of fiscal year 2021 on Jan. 27, 2021. This is the quarter that ended on Dec. 31, 2020.
  • EPS were up significantly from the prior year and beat the consensus estimate.
  • Revenues also showed strong growth and beat estimates, exceeding $100 billion in a quarter for the first time in company history.
  • Apple posted double-digit percentage increases in revenue versus the prior year in every product category and sales region that it reports.

Broad-Based Strength

Apple’s record-setting performance was driven by a broad-based surge in revenues. “Our December quarter business performance was fueled by double-digit growth in each product category, which drove all-time revenue records in each of our geographic segments and an all-time high for our installed base of active devices,” stated Luca Maestri, Apple’s chief financial officer (CFO).

The revenue figures and year-over-year percentage increases by product category, along with the margins by which they beat (or missed) estimates, were: 

  • iPhone: $65.60 billion, up 17.2%, beat estimate by 9.7%
  • Mac: $8.68 billion, up 21.2%, missed estimate by 0.1%
  • iPad: $8.44 billion, up 41.1%, beat estimate by 13.1%
  • Wearables, Home and Accessories: $12.97 billion, up 29.6%, beat estimate by 8.4%
  • Services: $15.76 billon, up 23.9%, beat estimate by 6.5%

Quarterly revenue records were set in the iPhone, Wearables, and Services categories.

Slicing the data by region, the revenue figures and year-over-year percentage increases were:

  • Americas: $46.31 billion, up 11.9%
  • Europe: $27.31 billion, up 17.4%
  • Greater China: $21.31 billion, up 56.9%
  • Japan: $8.29 billion, up 33.3%
  • Rest of Asia Pacific: $8.23 billion, up 11.1%

Apple CEO Tim Cook believes that the results could have been even more impressive, if not for closures of Apple Stores precipitated by COVID-19. As he told CNBC: “Taking the stores out of the equation, particularly for iPhones and wearables, there’s a drag on sales.” Cook also indicated that Apple’s total installed base for iPhones is over 1 billion, up from the previous data point of 900 million, while the total active installed base for all Apple products is now 1.65 billion.

Increased Returns of Capital to Shareholders

Apple returned $28.39 billion to shareholders through share repurchases and dividends in the first quarter of fiscal year 2021, representing an increase of 17.1% from the same period in the prior year. Apple’s operating cash flow of $38.76 billion was a quarterly record, and CFO Maestri indicated that “we maintain our target of reaching a net cash neutral position over time.”

Significance for Investors

The broad-based gains in revenue reported by Apple certainly are an indicator of strength. Indeed, as noted above, CEO Tim Cook opined that certain categories of product sales could have been even greater, if not for closures of Apple Stores in response to COVID-19.

However, a key unanswered question is the degree to which COVID-19 lockdowns spurred sales to people forced to work at home, or to spend more leisure time at home. It is possible that the events of 2020 created one-time quantum leaps in the underlying drivers of Apple’s sales, to a degree that may not be replicable as 2021 progresses.

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