Apple Earnings Q2 2015

 

  • Apple's revenue grew by 27%, way faster than it did in Q2 a year ago.
  • iPhone sales continued to drive revenue growth, accounting for 69% of revenue in Q2.
  • Apple has now sold more iPhones in Q1 and Q2 2015, than it did in 3 quarters in FY 2014.
  • Apple reported solid profit margins with a 40% expansion in earnings per share.
  • Apple's enhanced capital return program and strong revenue guidance are positives.

Apple reported its earnings for Q2 2015 on 27 April post market hours. Apple beat analyst estimates of revenue and Earnings Per Share (EPS) for Q2. The company’s shares rose by 1.3% in after-hours trade, making a new all-time high, as it gave investors a lot to cheer about, including an enhancement to an already massive share repurchase program and a higher quarterly dividend.

Apple Earnings Q2 2015: Actuals vs Estimates

Apple (NASDAQ:AAPL) beat analyst estimates quite comfortably, putting together a strong performance in Q2.

Estimates Actuals Beat/Miss
Revenue ($ billion) 56.3 58 3%
EPS ($) 2.18 2.33 7%

Apple Q2 Earnings: Apple Sustains Higher Growth Trajectory

Apple’s revenue grew to $58 billion, beating its own guidance, as well as analyst estimates. Apple’s top line growth continued to impress, coming in at 27% YoY, driven by the iPhone’s resounding success.

Apple sustained its higher growth trajectory, growing at a much faster pace when compared to a 4.7% YoY growth in Q2 last year.

iPhone Sales Continue To Drive Revenue Growth

iPhone unit sales grew at 40%, to 61.2 million units, raking in 69% of Apple’s top line, up from 57% in the year ago quarter. Both unit sales and the Average Selling Price (ASP) declined compared to the record quarter in Q1 2015. That said, both measures remained at levels higher than those seen in 2013 and 2014.

iPhone sales generated $40.3 billion in revenue, up from $26 billion a year ago, at an ASP of $659 per unit in Q2.

Quoting Apple’s CEO Tim Cook from the earnings call transcript:

“We’re seeing fantastic results for iPhone, with revenue growth of 55% year on year, and we’re seeing a higher rate of switchers than we’ve experienced in previous iPhone cycles. The success of iPhone has been extremely strong in emerging markets, where unit sales were up 63% year on year.”

Apple has now sold more iPhones in Q1 and Q2 2015, than it had, in the first three quarters of FY 2014.

At 12.6 million units, iPad sales numbers were disappointing, though not for the first time in the last year. The rate of YoY decline in iPad sales has been accelerating for the last 4 quarters, with Q2 unit sales declining by 23% YoY. Revenue from iPad sales accounted for 9% of revenue, marking a significant decline compared to an average of 19% in 2013, and 17% in 2014.

Apple sold 4.6 million MACs to earn 10% of its revenue. The services segment accounted for 9% of revenue, while the other products segment, which now includes iPod, accounted for the remaining 3%.

Apple Q2 2015 Earnings: Profitability

Apple’s gross margins bettered its projections of 38.5% to 39.5%, coming in at nearly 41% in Q2.

Operating profit margins expanded to 32%, from 30% in Q2 2014, as growth in operating expenses lagged revenue growth. R&D expenses accounted for 3.3% of revenue, while Selling, General and Administrative expenses stood at 6% of revenue.

Apple’s net margin expanded by one percentage point over the year ago, to touch 23%.

Apple Earnings Per Share & Capital Return Program

Apple reported a diluted earnings per share of $2.33, growing at 40% YoY and declared an 11% increase in its cash dividend. Apple has declared a dividend of $0.52 per share, to be paid out to shareholders as on 11 May 2015.

Apple’s EPS expansion has been terrific, with earnings per share growing at 48% YoY in Q1 and 40% in Q2. Apple spent $7 billion as part of its share repurchase program. That said, Apple’s EPS expansion is largely a function of its solid profit margins.

Apple bought back 56.4 million shares, impacting its EPS by two cents or 1%. Excluding its share repurchases in Q2, Apple’s earnings per share would have grown at 38.7%.

Nonetheless, Apple’s capital return program, which includes share buybacks and dividends, is the cherry on top.

Apple now plans to have spent a cumulative $200 billion as part of its capital return program, by March 2017. Of this, Apple has already returned over $112 billion to shareholders, split into $80 billion worth of shares buybacks and $32 billion worth of dividends.

Over the next two years, Apple plans to buyback an additional $60 billion worth of shares, and distribute $28 billion in the form of dividends.

Apple Earnings Q2 2015: Summing It Up

Apple delivered another strong quarter of solid growth and profitability, with exceptional earnings growth. In the words of Apple CEO Tim Cook:

“Today, we’re reporting our strongest March quarter ever, with 27% revenue growth and 40% earnings per share growth year over year.”

Additionally, Apple hiked its cash dividend for the third time in as many years, and expanded its capital return program.

Apple’s revenue guidance of $46 to $48 billon implies another quarter of strong growth, with the company projecting a 23% to 28% YoY growth in its top line.

Apple’s strong performance gives us enough reasons to be bullish about the stock. For a quick roundup of other key fundamentals like operating cash flows, free cash flows and valuations, you can see our Apple stock analysis video.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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