Apple Beats, Shares Jump

| About: Apple Inc. (AAPL)

Apple reported FQ4 EPS of $1.82, $0.40 better than the $1.42 expected by analysts. Sales of $9.87B were also well ahead of Street expectatiosn of $9.2B. International sales made up 46% of the quarter's revenue.

Apple said it sold 3.05M Macs, 10.2M iPods, and 7.4M iPhones during the quarter. Gross margin came in at 36.6%.

For the coming quarter (FQ1), Apple said it sees EPS of $1.70-1.87 (consensus $1.91) on sales of $11.3-11.6B (consensus: $11.45B). Normally, this would send a shudder through investors, but Apple is renowned for lowballing its forward-looking earnings estimates.

"This isn't just a one-quarter phenomenon, there's something bigger going on. There's a paradigm shift from a cell phone, a computer in your pocket. Apple's going to run away with that and ultimately, the numbers are going to be inching up as we go forward into 2010," Apple analyst Gene Munster told CNBC.

Shares are up 6% in after-hours trading on the strong beat.

Excerpts from Apple's FQ4 earnings press release below:

ple® today announced financial results for its fiscal 2009 fourth quarter ended September 26, 2009. The Company posted revenue of $9.87 billion and a net quarterly profit of $1.67 billion, or $1.82 per diluted share. These results compare to revenue of $7.9 billion and net quarterly profit of $1.14 billion, or $1.26 per diluted share, in the year-ago quarter. Gross margin was 36.6 percent, up from 34.7 percent in the year-ago quarter. International sales accounted for 46 percent of the quarter’s revenue.

In accordance with the subscription accounting treatment required by GAAP, the Company recognizes revenue and cost of goods sold for iPhone™ and Apple TV® over their estimated economic lives. Adjusting GAAP sales and product costs to eliminate the impact of subscription accounting, the corresponding non-GAAP measures* for the quarter are $12.25 billion of “Adjusted Sales” and $2.85 billion of “Adjusted Net Income.”

Apple sold 3.05 million Macintosh® computers during the quarter, representing a 17 percent unit increase over the year-ago quarter. The Company sold 10.2 million iPods during the quarter, representing an eight percent unit decline from the year-ago quarter. Apple sold 7.4 million iPhones in the quarter, representing seven percent unit growth over the year-ago quarter.

“We are thrilled to have sold more Macs and iPhones than in any previous quarter,” said Steve Jobs, Apple’s CEO. “We’ve got a very strong lineup for the holiday season and some really great new products in the pipeline for 2010.”

“We are delighted with our September quarter and fiscal 2009 results,” said Peter Oppenheimer, Apple’s CFO. “For the full year, we grew revenue by 12 percent and net income by 18 percent in extraordinarily challenging times. Looking ahead to the first fiscal quarter of 2010, we expect revenue in the range of about $11.3 billion to $11.6 billion and we expect diluted earnings per share in the range of about $1.70 to $1.78.”

In July 2008, the Company began selling iPhone 3G, the second-generation iPhone, and at that time significantly expanded distribution by establishing carrier relationships in over 70 countries. Unit sales of iPhone 3G have been significantly greater than sales of the first-generation iPhone. During the first quarter of iPhone 3G availability ended September 27, 2008, 6.9 million units were sold, exceeding the 6.1 million first-generation iPhone units sold in the prior five quarters combined.

In June 2009, the Company began selling iPhone 3GS, the third-generation iPhone. Unit sales of iPhones continued to be significant in the quarter ended September 26, 2009, with 7.4 million iPhones sold. As a result, the amount of revenue and product cost related to those iPhone sales that the Company deferred for recognition in future periods under subscription accounting was substantial. While the GAAP results provide significant insight into the Company’s operations and financial position, management continues to supplement its analysis of the business using financial measures that look at the total sales, related product costs and resulting income for iPhones and Apple TVs sold to customers during the period. The presentation at the end of this press release includes the following non-GAAP measures: “Adjusted Sales,” “Adjusted Cost of Sales,” “Adjusted Gross Margin,” “Adjusted Operating Margin,” “Adjusted Net Income” and “Adjusted Diluted Earnings per Share.” These financial measures are not consistent with GAAP because they do not reflect the deferral of revenue and product costs for recognition in later periods. The above-mentioned non-GAAP measures are generated by adjusting the related GAAP measures solely to reverse the effect of subscription accounting. The Company uses these financial measures, along with other measures discussed below, to provide additional insight into current operating and business trends not readily apparent from the GAAP results.