Apple AAPL reported their Q3 earnings on Tuesday, and the tech giant beat Consensus Estimates by 3.81%, reporting earnings of $2.18 per share. Apple rose over 4% in the aftermath of the earnings beat. The boost from the Q3 earnings beat added to AAPL’s already solid year, with shares up 38.1% year-to-date. Apple has been able to beat Consensus Estimates the past four quarters for an average EPS surprise of 3.04%. Can the iPhone maker continue its solid year in Q4? Let’s take a closer look into AAPL’s Q3 performance and how they might stack up in Q4 to close their fiscal year.
In Q3, Apple’s earnings fell 6.84% and brought in $53.8 billion, beating our sales estimate by 0.9%. The company’s iPhone sales continued to struggle in Q3, down 11.82% to $25.9 billion. Apple’s Mac sales beat our estimate by 6%, generating $5.82 billion for a 10.7% jump. iPad sales grew 8.39% to $5.02 billion while wearables and accessories surged 48% to $5.53 billion. The company’s services segment continued its year over year gains in Q3, gaining 12.6% to $11.5 billion.
The company missed our revenue estimates generated from the Europe and China markets. European sales declined 1.8% to $11.9 billion for a 1.8% decline, while Greater China generated $9.16 billion, falling 4.13%. The Americas remained strong for the company, rising 2.09% to $25.06 billion. The rest of Asia Pacific rose 13.3% to $3.59 billion while Japan revenues increased 5.56% to $4.08 billion.
The weakness in Apple’s iPhone sales was offset by the growth in the Mac and wearables segments. iPhone sales attributed 48.3% of the company’s total revenue, which is the first time it didn’t account for over half of Apple’s total revenue since 2012. Back in Q2, Greater China sales fell 22%, so the region’s Q3 performance could indicate that the company’s China troubles are starting to ease.
Is there another earnings beat in the cards for Apple in Q4? Consensus Estimates are calling for the company’s bottom line to decrease 7.9% while the top line declines 3.38% to $60.77 billion in Q4. Key Company Metric estimates are projecting iPhone sales to continue its decline in Q4 with a falloff of 16.4% to $31.1 billion. Mac growth is estimated to come to an end in Q4 with a drop of 4.55% to $7.07 billion. The wearables segment is projected to continue its growth campaign, surging 25.6% to $5.32 billion. Services is projected to grow 22.22% in Q4 to $12.2 billion while iPad sales increase 4.48% to $4.27 billion.
Another thing to consider is if the looming trade war will continue to hinder the company’s Greater China growth in Q4. Estimates are forecasting for Greater China sales to reach $11.42 billion, which would be a slight increase from the prior year quarter. The Americas geographic segment is expected to attribute $27.54 billion, while Europe is estimated to bring in $15.4 billion. Furthermore, Japan is expected to account for $5.17 billion, and the rest of Asia Pacific is predicted to bring in $3.43 billion.
Estimates are projecting for the company to make a slight recovery in its Greater China sales in Q4 2019, which would bode well for the tech giant and shareholders. The decline in iPhone and Mac sales can potentially be offset by the continued growth in the wearables, services, and iPad segments. If Apple can manage to get out of its China slump, it can potentially propel into a spectacular year.
Q4 Consensus Estimates would put the company’s fiscal 2019 earnings at $11.47 per share and revenue at $256.5 billion, a decrease of 3.69% and 3.42%, respectively. Looking ahead to Apple’s next fiscal year, earnings are expected to make a gain of 11.58% with total sales spiking 3.87% to $266.4 billion. Apple is listed as a Zacks Rank #3 (Hold) with a Style Score of B in Growth as well as Value. AAPL has also been the second most successful stock this year among its FANG peers: Facebook FB, Netflix NFLX, and Alphabet's GOOGL.
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