Earnings Summary: Apple (AAPL) Knocks The Cover Off The Ball

Once again, Apple (AAPL) trounced the estimates. Earnings per share were much better than expected, coming in at $1.35, which represents 13% year over year growth. Revenue also topped expectations, rising 12% from the year-ago period, and gross margins were well above company guidance, rising all the way to 36.3%.

It was a really great quarter for the company, which characterized it as the best non-holiday quarter ever for the company. Macs sold more than expected (2.6 million units), iPhones exceeded the high end of estimates (5.2 million units), and only iPods were in line at 10.2 million units, which was widely expected, as there were no new product introductions or refreshes in this product line.

Management said Macs had their best June quarter ever, led by laptops, which grew 13% vs. the year-ago period. iPods experienced a year-over-year decline of 7%, and the company said that it is normal to expect more declines in this segment over time. That said, it is still a very good business for the company, and it should last for many years. iPhone sales do cannibalize iPod sales some, as the iPhone can be used to play MP3s also, as well as the iTouch.

iPhones had a phenomenal quarter with the introduction of the new 3GS phone, the upgrade to the new operating system and the price cuts in the old iPhone to $99. The company said it was capacity constrained and has not bee able to satisfy all the demand it is seeing for the iPhones, but Apple said it is working on remedying the situation. Ditto for the lead times that customers are currently experiencing for the new Macbooks.

Margins were really strong, surprising everyone, as the company did a great job keeping down component costs and also was able to keep a lid on costs associated with the ramp of new products.

Here are a few key metrics:

• Operating margins topped 20%.
• International revenue accounted for 44% of the total.
• Cash and investments now total $31.1 billion.
• Over 65,000 apps are now available, and customers have downloaded over 1.5 billion apps so far.
• Six new retail stores were opened in the quarter.
• 50% of Macs sold were to first-time buyers.

In terms of guidance, the company gave its usual ultra-conservative guidance, but I have to say that next-quarter EPS guidance did come in above the whisper numbers I was hearing. The CFO said EPS is expected to fall in the range of $1.18 to $1.23 (vs. $1.30 consensus), and revenue it expected to be $8.7 billion to $8.9 billion (vs. $9.07 billion consensus). Gross margins are expected to decline to 34%, and the tax rate should come in around 30%.

There was no mention of Steve Jobs whatsoever. The only thing management said it was looking forward to was the release of the new Snow Leopard software.

The stock had a brief reaction after hours to the conservative guidance and very briefly traded below $150. Congrats if you were able to nab any shares down there, because it soon rebounded and was back over $158. I think the stock is fine here, as the company continues to execute very well, and Mac sales should pick up into the back-to-school season and as the economy recovers. For those reasons, in addition to the pickup in growth rates, I believe the premium multiple is justified.

That said, I don't think you need to chase the stock here. The shares have had a big run, and I wouldn't be surprised to see some consolidation in the near future. I think if you're patient, you can probably get a better entry prices than we will see tomorrow. I'm holding on to my shares and would only look to add to my positions on another dip below $150.

long AAPL