Apples Earnings Beat Was Driven By Broad-Based Execution

By Motley Fool Staff Markets Fool.com

Apple's (NASDAQ: AAPL)strong earnings beat on January 31 was driven by strong performance across numerous business segments. In this segment from Industry Focus: Tech, Motley Fool analysts Dylan Lewis and Evan Niu, CFA discuss the headline numbers and other areas where the company executed well.

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A full transcript follows the video.

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This podcast was recorded on Feb. 3, 2017.

Dylan Lewis: I doubt that you could possibly bedoing as well as Apple is doingthis week, though.

Evan Niu:[laughs] That's true.

Lewis:It'snot too often that you see the world's largest company spike6% after earnings.

Niu:Yeah. Thenumbers they put up,I mean, I was pretty impressed. I wasn't really expecting them to blow it out like this, and beat their own guidance by $400 million.

Lewis:Yeah. We always do the Apple earnings show,it's one of my favorites to do. But after several in a row where we've been, like, "Yeah,we know that growth is slow or even declining, but just be patient,we think it's going to be OK,"it will be nice to do a show wherewe can talk about them andhave a bit of a rosier outlook on things, andmaybe reaffirmsome of the confidence that the Streetshould have in the business. In a lot of ways,it's still a fantastic company. Why don't we start out with a big numbers here?Revenue came in at $78.3 billion, which beat estimates of $77.3 billion. Also beat the company's guidance,like you said, by a couple hundred million. Earnings per share came in at $3.36 for the quarter, whichalso beat estimates of $3.22. So, for the first time since fiscal Q1 of last year, the company posted year-over-yearrevenue growth.

Niu:Yeah.I think that's one of the big stories. 2016 was so tough on themin terms of storylines and sentiment, because, yeah,first year ever of showing negative growth, and everyone is kind of gloomy about it. Then,they come back and say, "Westill have it in us, we can still set records,we can still push all these different parts of the business to these completely record levels,"including the Mac, which is crazy, because the Mac hasbeen around for 40 years, and they're stillcontinuing to grow it and push up higher.

Lewis:And they've beenworking against so many headwindsfor such a long time in that year. Youlook at the strong dollar having a pretty sizable impact onthe money they make overseas,and also the selling price of devices overseas. Youlook at the elongating of the upgrade cycle,particularly with some of the wireless carriersmoving away from a subsidy model, andgetting people off of that two-year upgrade.

So,there are just a lot of things pushing against what would normally cause people to be buying phones, or would beallowing them to recognize more in revenue and earnings here in the U.S. So,it's nice to see them bring it back up this quarter.

Dylan Lewis owns shares of Apple. Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy.