Apple Inc. (NASDAQ: AAPL) has managed a huge surprise on earnings today.  Steve Jobs and friends posted earnings of $4.64 EPS and a record of $20.34 billion in revenues.  Thomson Reuters has estimates of $4.06 EPS and $18.86 billion in revenues versus $4.03 and $18.72 billion in revenues just at the end of last week.  The company’s prior guidance was about $3.44 EPS and about $18 billion. This was an upside blowout on the surface, the question is whether the margin mix and individual unit sales mixes were enough to keep the bulls alive at all-time high share prices.

As far as guidance, Apple is looking for about $4.80 EPS and revenues of about $23 billion.  The consensus from Thomson Reuters for the following quarterly report is $4.99 EPS and $22.06 billion in revenues.   For Apple, estimates had risen and we gave a full Apple analyst outlook layout featuring all of the most recent key research calls.

There are a couple of things to highlight here.  First are margins.  Gross margin was a bit low at 36.9%, down from last quarter’s 39.1% and last year’s 41.8%.  International sales are taking away a US-centric focus from the company now and in quarters ahead.  International sales keep growing as well because international sales were 57% of the quarter’s revenues versus 52% last quarter.  The 4.19 million iPads is a great feat, although some were expecting as many as 4.5 million.

INDIVIDUAL PRODUCT GAINS:

• sold 3.89 million Macs, up 27% from a year ago;
• sold 14.1 million iPhones, 91% over a year ago;
• sold 9.05 million iPods, a DECLINE of 11% from a year ago;
• sold 4.19 million iPads during the quarter.

The translation here is over $4 billion in after-tax earnings.  Steve Jobs left a door open for more hype throughout the last 70 or so days of the year when he noted, “We still have a few surprises left for the remainder of this calendar year.”

As a reminder Apple has the following weighting on each key ETF:

• over 22.7% of the Internet Architecture HOLDRs (NYSE: IAH);
• nearly 20% of the highly traded PowerShares QQQ (NASDAQ: QQQQ) weighting;
• over 11.7% of the Technology Select Sector SPDR (NYSE: XLK);
• more than 16% in the ProShares Ultra QQQ (NYSE: QLD),
• and more than 12% of the weighting of the iShares Dow Jones US Technology (NYSE: IYW).

Apple shares closed up 1% at $318.00 and the stock hit a new all-time high of $319.00 today.  The market cap at the close of trading was roughly $290.5 billion.  Apple shares were halted and the first resumption time we have is 4:50 AM EST.

JON C. OGG

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