The ups and downs of Apple’s revenue, diluted earnings, iPhone sales, services and revenue from greater China.
Apple beat expectations on the top and bottom lines. The stock, which had closed down nearly 2%, immediately jumped more than 5% in after-hours trading, despite lower iPhone sales (-17%) and Greater China revenues (-22%) year-over-year.
From the press release:
“Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for Services, and the strong momentum of our Wearables, Home and Accessories category, which set a new March quarter record,” said Tim Cook, Apple’s CEO. “We delivered our strongest iPad growth in six years, and we are as excited as ever about our pipeline of innovative hardware, software and services.
“We generated operating cash flow of $11.2 billion in the March quarter and continued to make significant investments in all areas of our business,” said Luca Maestri, Apple’s CFO. “We also returned over $27 billion to shareholders through share repurchases and dividends. Given our confidence in Apple’s future and the value we see in our stock, our Board has authorized an additional $75 billion for share repurchases. We are also raising our quarterly dividend for the seventh time in less than seven years.”
Reflecting the approved increase, Apple’s board of directors has declared a cash dividend of $0.77 per share of the Company’s common stock, an increase of 5 percent. The dividend is payable on May 16, 2019 to shareholders of record as of the close of business on May 13, 2019.
- revenue between $52.5 billion and $54.5 billion
- gross margin between 37 percent and 38 percent
- operating expenses between $8.7 billion and $8.8 billion
- other income/(expense) of $250 million
- tax rate of approximately 16.5 percent
Below: The five charts. Click the second column to see year-over-year growth. (Not seeing the charts? Try the website.)
The dividend and repurchase authorizations seem to, at least temporarily, contradict the “cash neutral over time” narrative. Aside from that, I’m very satisfied as an investor.
Dan:
The $75 billion enhancement to the Apple’s share repurchase program exceeds Apple’s net income in FY2018 by about $15 billion. FY2019’s net income is likely to be below FY2018’s level and there’s still funds to be disbursed for repurchases under the previous authorizations. The company is still working towards a net cash neutral position. In FY2019, Apple will pay out well over $13 billion in dividends. Please remember, and although it’s a wash in terms of the net cash neutral position, cash is being used to pay down debt as the instruments mature.
In all, I’m satisfied with the announcements as well.
That tiny 5% dividend increase surely signals something. A major services acquisition?
With a 10% increase historically, a 16% increase previously, an ongoing reduction in share count, a public goal of being cash neutral, and a loyal-Cubs-fan like long term investor group envious of the winnings of other tech stocks… it has me wondering.
Curious that the dividend only grew 5%. Based on several statements Tim has made over the years I get the impression they are not fans of dividends. Maybe for tax reasons. Dividends are paid with after tax money and are taxed again when received. I guess it rose 15% last year because of the share price run up. Because of the share count reduction a 5% increase might mean a reduction in the total dollars paid as dividends. Anyway, it grew faster than inflation.
Re: Dividends: Half our AAPL is in IRA’s, so the tax on those dividends is close to a third of the amount pulled out for dividends pay-out. Plus pulling out more this year to pay taxes last year means paying more tax next year!
I’ll take the stock buybacks, thank you.
John:
Good catch. At the pace Apple has been repurchasing shares over the past four quarters, the reduction in the share count is likely to materially offset the 5% increase in the dividend. In other words, the cash disbursements for dividends over the next four quarters is likely to stay at or below the levels of the most recent four quarters.
That is, of course, one of the benefits of the share repurchase program. Apple can continue to raise the divided per share without increasing the cash disbursements for dividends provided the percentage increase in the dividend is at or below the percentage decrease in the fully diluted share count.
I welcome Apple making moves into India, a tough nut to crack, but one Apple must crack for new growth. A transformational opportunity exists for India to do what China has done in lifting hundreds of millions of its good citizens out of poverty.
India is the second fastest growing economy in the world. While China’s population grows rapidly older, India’s population will remain young for decades to come.
Demographics show the population of the two countries essentially are the same, around 1.4B. Half a billion people in India, though, are less than 25 years of age.
Tim Cook admits India is a challenging market but also denotes that India’s smartphone market primarily is Android. So, there is lots of potential for Apple in India.
Can someone elucidate on the 5% increase in dividends?
The small dividend sounds like Apple wants to keep its powder dry for an acquisition.
There won’t be any substantial acquisitions in the times to come.
With this 5% of dividend increase, apple buys another year with a 5% increase plus reduced share counts because of buybacks…much cheaper than an 10% increase this time.
Dividend-payments are the minor factor when it comes to cash retributions to shareholder, the majority comes from buybacks.
Plus: because of the actual highs in the stock market there isn’t only one big player where an acquisition would justify the price Apple would have to pay…..
There is a glass half full vs glass half empty YoY compare going on with some analysts.
Fact: total profit from last quarter was quite a bit higher than it was in Q2 2017 and Q2 2016.
But it’s lower than the Q2 in 2018.
My point is, rather than pointing out a bad one YoY compare, I say Q2 2018 just happened to be a very good year, and so it was an anomaly. Q2 2019 was very good when compared to the two prior years.
So Apple is still growing, but in arguably a normal ebb and flow. In other words, this is a short-term POV vs the long-term. I say, long term-as the brand new services revenue gets added, and inevitably increases, Apple overall revenue is going to grow.
The Street can barely see past a few quarters, much less a few years.
This is a very good observation for long-term holders or potential future holders, but Mr Market can’t see past quarter-on-quarter, so to ask Mr Market to see Y-o-Y-o-Y (to say nothing of Y-o-Y-o-Y-oY) is just too much to ask. This frightens investors, too, because Mr. Market ends up saying stupid things, which scares investors … which scares investors.
(Yeah, I know, it’s really circular. Basically, though, I’m totally agreeing with you.)
(See also iPhone 6 “tough compare”.)
(and other similar stuff.)
*sigh*
But at least we’re up today, which is better than the usual “sell on the news”.