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Strong Earnings: Buffett's Apple Sweetens Dow's Treat to Investors

Shares of Apple Inc. (NASDAQ:AAPL), the top holding of Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B), soared over 2% in aftermarket trading on Wednesday, boosting early gains.


For the quarter ending Sept. 28, the company's fiscal year-end date, the Cupertino, California-based consumer electronics giant reported net income of $13.686 billion, or $3.03 in diluted earnings per share, compared with net income of $14.125 billion, or $2.91 in earnings per share, in the year-ago quarter. Revenues of $64.04 billion outperformed the Refinitiv estimate of $62.99 billion and the prior-year quarter revenue of $62.90 billion.

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Company accelerates revenue growth in Services and Wearables

Apple CEO Tim Cook said the company concluded a "groundbreaking" fiscal 2019, with strong growth in Services, Wearables and iPad sales fueling record September-quarter revenues. Cook mentioned during the earnings call that Services revenues reached a new quarterly high of $12.5 billion on continued growth in App Store, Apple Music and Apple Care. Additionally, Apple Pay transactions of 3 billion exceeded that of PayPal Inc. (NASDAQ:PYPL). Cook said that the company has potential of doubling its fiscal 2016 services revenue during 2020.

Cook also mentioned that Apple's Wearables business achieved record sales across all regions, driven by continued growth in the Apple Watch and investments in medical research. The CEO mentioned that new Watch apps enable users to report electrocardiogram results to their doctor.

Company reports holiday guidance in line with estimates, sees bullish trends on iPhone 11

Chief Financial Officer Luca Maestri expects revenues for the December quarter to range between $85.5 billion and $89.5 billion, in line with the Refinitiv estimate of $86.92 billion. Cook and Maestri said during the question-and-answer session that while iPhone sales declined 9% year over year, management expects bullish trends in Apple's iPhone 11, 11 Pro and 11 Pro Max models.

Cook also mentioned during the earnings call that results in China improved as the fiscal year progressed, with a year-over-year decline of over 20% during the December 2018 quarter to a year-over-year decline of just 2% during the September quarter.

Stock soars in aftermarket trading

Apple traded at a post-market high of $249.07 on Wednesday, a day where U.S. markets soared on Federal Reserve Chairman Jerome Powell's comments that while he approved lowering the benchmark rate to a range of 1.5% to 1.75%, he also indicated that further rate cuts are subject to a higher bar. The Dow Jones Industrial Average closed at 27,186.69, up 115.27 points from Tuesday's close on the news.

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GuruFocus ranks Apple's profitability 10 out of 10 on several positive investing signs, which include a strong Piotroski F-score of 7, a 4.5-star business predictability rank and operating margins that are outperforming 96.91% of global competitors despite contracting approximately 1.90% per year on average over the past five years.

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Berkshire has not released its third-quarter portfolio as the deadline is 45 days after the quarter ends. As of second quarter-end, Buffett's conglomerate owns 249,589,329 shares.

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Including Berkshire, gurus that received a pre-Halloween treat from Apple include Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Spiros Segalas (Trades, Portfolio).

Disclosure: No positions.

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This article first appeared on GuruFocus.