Apple (AAPL – Free Apple Stock Report) shares came under pressure on the heels of the tech giant's earnings report for the fourth quarter of fiscal 2018 (ended September 29th). Results for the period actually exceeded expectations (more on that later), but guidance for the seasonally important December interim was on the light side. And Wall Street appeared displeased with the company's decision to no longer disclose unit sales for its iPhone, iPad, and Mac platforms.
Some analysts are taking this accounting change to mean that iPhone shipments have peaked globally, and that year-over-year declines are likely on the way. Apple remains a cash cow, however, and the change seems to make sense in light of the company's focus on driving services revenues and lifting margins. Plus, average selling prices (ASPs) for nearly all of Apple's products are rising nicely, suggesting that good top-line growth can persist well into the future, even if unit volumes slow a bit.
Looking more closely at the fourth-quarter performance, share net came in at $2.91, surpassing our $2.74 estimate and the consensus view of $2.78. Revenues were also higher than anticipated, jumping 20%, to $62.9 billion, notwithstanding flat iPhone deliveries of 46.9 million units. The top- and bottom-line beats were supported by an impressive 28% increase in the smartphone's ASP, to $793. Additionally, services revenue climbed a hefty 27%, to $10 billion, after adjusting for one-time items. And share net was bolstered by aggressive stock buybacks, as the company returned over $23 billion to shareholders via repurchases and dividends.
Turning to the outlook, we think that Apple will remain a healthy grower through fiscal 2019 and beyond. December-period revenue guidance of between $89 billion and $93 billion was light relative to our roughly $94 billion forecast. Currency headwinds (i.e., the strong U.S. dollar) appear to be behind the cautious outlook, however, along with challenging conditions in select emerging markets, like Brazil, India, and Russia. And revenue advances should still be solid in the coming quarters, as sales of the latest iPhones(the XS and XS Max models) drive ASPs higher, and as the company leverages its huge installed base to further expand its high-margined services business.
We continue to like this mega-cap Dow stock for most investors, especially conservative buy-and-holders. And we're leaving our fiscal 2019 share-earnings estimate at $13.70, in spite of the lukewarm first-quarter guidance. This would represent bottom-line growth of 15%.
About the Company: Apple Inc. is one of the world’s largest makers of PCs and peripheral and consumer products, such as the iPod digital music player, the iPad tablet, the iPhone smartphone, and the Apple Watch, for sale primarily to the business, creative, education, government, and consumer markets. It also sells operating systems, utilities, languages, developer tools, and database software.
- Justin Hellman
