Apple's Profits Soar

October 20, 2009

After yesterday's closing bell, Apple (AAPL) reported blow-out earnings of $1.82 a share which is a 47% increase over last year's fiscal fourth quarter. This report was simply astounding; Apple exceeded even the most optimistic forecasts. Sales rose 25% to $9.87 billion. To put this in context, the consensus on Wall Street was that Apple would earn $1.43 a share on sales of $9.22 billion.

Two weeks ago, I looked at an issue that was hotly debated on Wall Street–who was going to break $200 first, Goldman Sachs (GS) or Apple? On October 7, the two stocks closed within 23 cents of each (GS at $190.48 and AAPL at $190.25). After weighing the evidence, I concluded that Apple would be the first to $200. Here's what I said:

In July, Apple said to expect EPS for this report to fall in a range between $1.18 and $1.23. Please! They made $1.26 the same time last year, and I don't see how they did worse than a year ago when the economy was starting to come unglued. I would be shocked if Apple earned anything less than $1.40 a share. Expect a big surprise here.

It looks like I was exactly right. Thanks to the strong earnings report, Apple should easily soar over $200 a share today once trading starts (the stock nearly got to $205 in yesterday's after-hours market). Although Goldman has been as high as $193.60, it closed yesterday at $185.50.

I was also impressed by Apple's forecast for its fiscal first quarter. The company said that revenue will range between $11.3 billion and $11.6 billion, and earnings should fall between $1.70 and $1.78 a share. The stock is an outstanding buy.

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