Technology giant Apple Inc. (AAPL – Free Apple Stock Report) has posted results for the third quarter of fiscal 2017 (ends September 30th). The top line advanced 7% from the year-earlier total, to $45.4 billion, thanks in large part to the company's fast-growing Services revenues. On the bottom line, Apple earned $1.67 per share in the latest three-month period, marking an 18% improvement from the prior year. (We had looked for revenues of $45.0 billion and share net of $1.59.) Shares of the Dow-30 component traded sharply higher on the better-than-expected report, establishing a new record for AAPL stock.
In the September interim, the Cupertino-based company shipped 41.0 million iPhones, versus the 40.4 million units moved in the same period of fiscal 2016. Although demand for the iPhone remains healthy, it appears that the current line-up has lost a little momentum in recent quarters. We attribute this trend to customers deferring a purchase in favor of waiting for the highly anticipated 10th anniversary edition of the blockbuster smartphone. The updated device, which will reportedly be called iPhone 8, is expected to be announced at Apple's annual event held in September, and will likely have an edge-to-edge display, as well as other new features.
Apple's fiscal third-quarter report wasn't all roses, however. It continued to experience some headwinds in the important China market, where sales declined 10% compared with the year-earlier result. The company is facing tough competition in the world's most-populous country from local OEMs, such as Oppo, Vivo, and Huawei, to name a few. Unfavorable currency movements have also been an obstacle to growth in that nation. Still, our long-term outlook for Apple's prospects in China remain positive, as the company continues to build out its store base there.
In all, it was another strong quarter for the industry giant, and our estimates for fiscal 2017 remain intact. We foresee revenues of $228 billion for the full year, and share net of $9.10. (The former would represent growth of 5%-6% from fiscal 2016, while the latter would mark a 9%-10% advance.) Looking ahead to fiscal 2018, we expect the top and bottom lines to expand 6%-8% and 12%-14%, respectively, to $244 billion and $10.25 per share.
There's a lot to like here from an investment perspective. Apple continues to reward shareholders with its generous capital return program, which aims to disburse $300 billion in the form of stock buybacks and dividend increases through March of 2019. Total return potential to 2020-2022 is worthwhile on a risk-adjusted basis, and the well-covered payout should pique the interest of income-focused accounts. Moreover, the stock earns high marks for Safety (2), and the company garners a stellar rating for Financial Strength (A++). In sum, Apple Inc. shares would make a fine addition to most portfolios.
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.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
