🍎📊 Apple's Earnings Update!

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May 07, 2023

Hi all,

Happy Sunday, everyone. A lot of new readers are coming from the free templates that I shared on my link in bio maker / from YouTube channels. So if that’s you - hello and welcome 👋. In today’s Sunday Primer, we’ll talk about Apple’s recent earnings report, as well as Inflation & Interest Rates!

I spent 30 minutes in line to get a croissant yesterday, at a bakery in San Francisco called Arsicault. The almond croissant I got was definitely the best croissant I’ve ever had - and I was told that the high demand for this place was due to the virality of Tik Tok. What’s the longest you’ve ever waited for a croissant?

The yellow arrow is where the bakery is 😱

I hope you enjoy this Sunday’s Hump Days :)

— Humphrey, Tim & Rickie

Market Report

Apple Inc.'s recent quarterly earnings report revealed better-than-expected results, with the tech giant experiencing a slight rebound in iPhone sales that pushed its overall revenue to $94.8 billion for the second quarter. This exceeded analyst predictions of $92.6 billion and showed signs of recovery from a sales slump in both the computer and smartphone segments. Although sales declined by 2.5%, Apple had previously warned investors to anticipate a drop of around double that figure.

iPhone sales generated $51.3 billion in the second quarter, surpassing analyst expectations of $49 billion, and marking a record performance for a March quarter. CEO Tim Cook attributed the increase to overcoming the challenging macroeconomic environment. However, the iPad, Mac, and services segments fell short of expectations, with iPad revenue dropping 13% to $6.67 billion, Mac revenue falling 31% to $7.17 billion, and services business revenue reaching $20.91 billion, missing estimates of $21.1 billion.

Despite the mixed results, Apple performed well in emerging markets, with record sales in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey, and the United Arab Emirates, and growth in India. The company continues to manage for the long term, with plans for $90 billion in stock repurchases and a 4% increase in its quarterly dividend to 24 cents a share.

The Federal Reserve continues to grapple with inflation and upheaval in the banking industry, which has led to the closure of three mid-size banks, most recently First Republic. Despite officials insisting that the industry is stable, tighter borrowing standards are expected to further impact economic growth, which was just 1.1% annualized in the first quarter.

This past Wednesday, the Fed's post-meeting statement acknowledged that these tighter lending conditions would likely affect economic activity, hiring, and inflation. The central bank's economists warned of a shallow recession resulting from banking issues.

The market is currently pricing in rate cuts later this year in anticipation of slower growth and the possibility of a recession. While manufacturing has contracted for the past six months, the services sector and labor market have remained resilient.

But despite recent data indicating a softening in price increases, "sticky" items such as housing costs and medical care have remained higher. In the upcoming week, U.S. inflation data will offer insights into whether the Federal Reserve can halt its sequence of interest rate increases at the next month's meeting. The core consumer price index, excluding food and energy, is expected to rise by 5.5% in April compared to a year ago, following a 5.6% increase in the previous month. This yearly increase suggests a minor slowdown in the pace of core price pressures, indicating that inflation remains persistent.

The core inflation rate has fluctuated between 5.5% and 5.7% over the past four months, highlighting the persistent nature of inflation.

The report, to be released this Wednesday, will be the first of two CPI updates that Fed policymakers will consider before making their June rate decision.

Forecast Ahead

The most anticipated earnings releases scheduled for the week are PayPal #PYPL, Palantir #PLTR, Airbnb #ABNB, Disney #DIS, Devon Energy #DVN, Tyson Foods #TSN, BioNTech #BNTX, Roblox #RBLX, Rivian Automotive #RIVN, and Occidental Petroleum #OXY.

The upcoming week will be slightly quieter for company earnings compared to the previous week. Nonetheless, notable companies such as PayPal, Airbnb, Disney, Electronic Arts, Toyota, and Honda are set to release their earnings reports.

So far, 85% of S&P 500 companies have reported their earnings. Among them, 79% posted earnings per share (EPS) that exceeded expectations, while 75% surpassed revenue estimates, according to FactSet data. The blended earnings decline for S&P 500 companies, which includes both those that have reported and those yet to report, stands at 2.2%. If this trend continues, it will represent the second consecutive quarterly decrease in earnings. For companies generating more than 50% of their revenue within the U.S., average earnings growth was 2.7%, suggesting that international sales posed a challenge for S&P 500 companies during the first quarter.