On Tuesday, Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio)’s top holding, Apple Inc. (AAPL, Financial), said services revenues set a new record during the fiscal second quarter.
For the quarter ending March 31, the Cupertino, California-based tech giant reported net income of $11.56 billion, or $2.46 in earnings per share, compared to net income of $13.822 billion, or $2.73 in earnings per share, in the prior-year quarter.
Company boosts growth in key business segments like iPad, Services and Wearables
CEO Tim Cook said the company set a new all-time record of $11.5 billion in services revenues, topping the prior quarter’s revenue of $10.9 billion. Likewise, revenues in wearables, home and accessories reached a new March-quarter record of $5.129 billion.
Cook highlighted several achievements across Apple’s businesses during the earnings call, including iPad sales growth of 22%, “the highest growth in six years.” Apple returned to growth in the Greater China region and posted double-digit growth in other geographical regions, boosted by iPad Pro sales. Cook mentioned new iPad product launches, including the iPad mini, which includes the A12 biochip featured in the iPad Air. The CEO also mentioned strong growth in the services and wearables, home and accessories businesses as the company’s active installed base continues to grow.
Cook also said revenues in Greater China improved from the December quarter. According to CNBC columnist Kif Leswing, Cook said in a CNBC interview with Josh Lipton that the company “saw greater strength” toward the end of the quarter and that the trade relationship between the U.S. and China had improved.
Company soars in post-market trading on strong outlook and dividend hike
Apple closed at $200.67, but then soared over 4.5% in post-market trading on the strong revenue guidance for the upcoming June quarter. Management gave revenue guidance between $52.5 billion and $54.5 billion, surpassing Refinitiv's estimate of $51.94 billion. Additionally, the board of directors declared a 77-cent dividend on the company’s common stock, a 5% increase. Chief Financial Officer Luca Maestri said the company raised its dividend and authorized an additional $75 billion for share repurchases given management’s confidence in the company’s future and the value placed on the stock.
Meanwhile, the Dow Jones Industrial Average closed at 26,592.91, approximately 235 points lower than the all-time high of 26,828.39 set on Oct. 3, 2018.
Wedbush analysts Daniel Ives and Strecker Backe said in a “first take” report that while the skeptics “continue to scratch their heads” on Apple’s “meteoric” rebound from the Jan. 3 low of $142.19, Wedbush remains buyers of Apple’s shares at current levels going into a major product cycle and a “new streaming services initiative” that expects to “garner 100 million consumers over the next three years.”
GuruFocus ranks Apple’s profitability 8 out of 10 on several positive investing signs, which include consistent revenue growth and returns that are outperforming 94% of global competitors. Additionally, operating margins are still outperforming 96% of global competitors despite contracting approximately 1.9% per year over the past five years.
Buffett’s conglomerate owns 249,589,329 shares of Apple as of the latest portfolio date. Other gurus with large holdings in Apple include Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Spiros Segalas (Trades, Portfolio).
Disclosure: No positions.
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