CAT: Earnings Report for the Quarter Ending December 31, 2020

Caterpillar reported before the market opened on January 29, 2021, it earned $1.42 per diluted share in the quarter that ended on December 31, 2020, down 28 percent from earnings of $1.97 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted Profits, a non-GAAP figure, fell 22 percent to $2.12 per share from $2.71 one year earlier, a decline not as steep change than the GAAP percentage. The exclusions responsible for the $0.70 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Pension mark-to-market  [$0.63 per share], and Restructuring costs [$0.07 per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by Caterpillar to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Caterpillar's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Caterpillar is a leading manufacturer and servicer of machinery for construction, mining, energy production, and transportation.  The company also has finance subsidiaries that help customers and dealers purchase and lease Caterpillar and certain other products.  Demand for Caterpillar's products tends to vary as economic conditions strengthen and weaken and commodity prices rise and fall.

The following table is a simplified version of Caterpillar's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $11.2 billion, 15 percent less than last year. The Construction Industries business was responsible for 40 percent of overall revenue, and this unit's revenue percent fell by 10.2 percent compared to the year-earlier result. The Resource Industries business contributed 19 percent of revenue, and this unit's revenue decreased by 9.0 percent. The Energy & Transportation unit supplied 43 percent of revenue, and this business's revenue fell by 19.1 percent.

I was expecting Caterpillar to report revenue of $10.7 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $535.0 million (5.0 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $7.8 billion in the latest quarter, which translates into a Gross Margin of 30.7 percent of revenue.  I was expecting the Gross Margin to be 30.3 percent in the December 2020 quarter, and Caterpillar exceeded that prediction by 0.5 percent.

Caterpillar spent $374 million on Research and Development in the latest quarter, down from $386 million one year ago. I had estimated that R&D expenses would be $374 million.  R&D was 3.3 percent of Revenue.

Sales, General, and Administrative expenses totaled $1.2 billion in the December 2020 quarter, down 5.2 percent from one year ago.  SG&A expenses increased from 9.8 percent to 10.8 percent of quarterly revenue, which shows Caterpillar spent more per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 10.5 percent of revenue, and the actual percentage turned out to be higher than the prediction.

The last operating expense line on the Income Statement is where the sum of other operating income and charges, such as restructuring, may be listed.  For Caterpillar the amount listed on this line was a $481 million loss in the latest quarter.  I was expecting a net loss of $482 million.

Caterpillar's Operating Income was $1.4 billion in the quarter, down 25.4 percent from the year-earlier period.  Operating Income exceeded my $1.3 billion estimate by $123 million.

Interest and other non-operating items summed to a net expense of $439 million.  My estimate for non-operating items was $508 million.

The effective income tax rate fell by 2.5 percent to 17.7 percent, which had a positive effect on net income.  I expected the tax rate to be 25.2 percent.

Net income attributable to Caterpillar was $780 million, $1.42 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $1.1 billion, $1.97/share. My earnings estimate for  the latest quarter was $556 million ($1.02/share), so Caterpillar earned $0.40 per share more than I had predicted.

In conclusion, the following list shows where the reported results differed from my expectations:

      – Better than expected:  Revenue growth + Misc non-operating items + Income tax rate + Non-controlling interests 

      – Worse than expected:  SG&A + Interest 

      – Near expectations:  Gross Margin + R&D + SG&A/Revenue + Special operating items 

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #caterpillar    #cat    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

WRK: Earnings Report for the Quarter Ending December 31, 2020

WestRock Company reported before the market opened on January 28, 2021, it earned $0.57 per diluted share in the quarter that ended on December 31, 2020, up 8 percent from earnings of $0.53 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted earnings, a non-GAAP figure, rose 5 percent to $0.61 per share from $0.58 one year earlier, a less robust change than the GAAP percentage. The exclusions responsible for the $0.04 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: COVID-19 relief payments [$0.06 per share], Restructuring and Loss on extinguishment of debt [$0.03 per share], and Gain on sale of investment [($0.05) per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by WestRock to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by WestRock's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  WestRock is a leading, multinational manufacturer of corrugated packaging, packaging for consumer goods, and other paper products.  WestRock was formed in 2015 when RockTenn and MeadWestvaco merged.  The combined company spun off its specialty chemicals operations and Home, Health and Beauty (HH&B) business in order to acquire several other firms in the  paper and packaging business.  The largest acquisitions were KapStone Paper & Packaging for $4.9 billion (2018) and Multi Packaging Solutions for $1.35 billion (2017).  In May 2020, in response to COVID-19, WestRock announced steps to reduce its expenses and to conserve cash.  Cutting the common stock dividend was one such step. Later in 2020, WestRock recorded a $1.3 billion non-cash charge to lower the carrying value of Consumer Packaging assets.  In January 2021, some of WestRock's electronic systems were impacted by a ransomware attack.

The following table is a simplified version of WestRock's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $4.4 billion, about the same as last year. The Corrugated Packaging business was responsible for 65 percent of overall revenue, and this unit's revenue percent fell by 1.5 percent compared to the year-earlier result. The Consumer Packaging business contributed 36 percent of revenue, and this unit's revenue increased by 3.8 percent.

I was expecting WestRock to report revenue of $4.3 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $64.5 million (1.5 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $3.6 billion in the latest quarter, which translates into a Gross Margin of 17.1 percent of revenue. Since it was lower than the 18.3 percent Gross Margin achieved in the year-earlier quarter, it's a sign that WestRock sold its products and services at less profitable prices relative to production costs. I was expecting the Gross Margin to be 18.0 percent in the December 2020 quarter, and WestRock missed that prediction by 0.9 percent.

Sales, General, and Administrative expenses totaled $418 million in the December 2020 quarter, down 1.9 percent from one year ago.  SG&A expenses decreased from 9.6 percent to 9.5 percent of quarterly revenue, which shows WestRock spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 10.0 percent of revenue, and the actual percentage turned out to be lower than the prediction.

The last operating expense line on the Income Statement is where the sum of other operating income and charges, such as restructuring, may be listed.  For WestRock the amount listed on this line was a $102 million loss in the latest quarter.  I was expecting a net loss of $120 million.

WestRock's Operating Income was $233 million in the quarter, down 7.3 percent from the year-earlier period.  Operating Income exceeded my $226 million estimate by $7 million.

Interest and other non-operating items summed to a net expense of $30 million.  My estimate for non-operating items was $80 million.

The effective income tax rate fell by 0.2 percent to 24.8 percent, which had a positive effect on net income.  I expected the tax rate to be 23.3 percent.

Net income attributable to WestRock was $152 million, $0.57 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $139 million, $0.53/share. My earnings estimate for  the latest quarter was $112 million ($0.43/share), so WestRock Company earned $0.14 per share more than I had predicted.

In conclusion, the following list shows where the reported results differed from my expectations:

      – Better than expected:  SG&A/Revenue + Special operating items + Misc non-operating items 

      – Worse than expected:  Gross Margin + Interest + Income tax rate 

      – Near expectations:  Revenue growth + SG&A 

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #westrock    #wrk    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

FB: Earnings Report for the Quarter Ending December 31, 2020

Facebook reported after the market closed on January 27, 2021, it earned $3.88 per diluted share in the quarter that ended on December 31, 2020, up 52 percent from earnings of $2.56 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

This post compares the quarterly Income Statement published by Facebook to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Facebook's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Facebook operates its eponymous and widely used social network, plus Instagram, WhatsApp, and Messenger. Advertising is responsible for almost all of the company's revenue.  COVID-19 accelerated a shift from offline to online commerce, and this increased demand for online advertising.  Facebook has been under fire for some time about how it protects (or doesn't) the privacy of its users, how it manages (or doesn't) inappropriate content, and whether it has abused its dominant position in the market.  In December 2020, the Federal Trade Commission sued Facebook, claiming the company's anticompetitive conduct helped it maintain a monopoly. In addition, changes that Apple is reportedly making to its mobile operating system to protect user privacy may have an adverse impact on Facebook.

The following table is a simplified version of Facebook's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $28.1 billion, 33 percent more than last year's $21.1 billion. The Advertising business was responsible for 97 percent of overall revenue, and this revenue grew by 31.1 percent compared to the year-earlier result. Other revenue contributed 3 percent of revenue, up 155.8 percent.

I was expecting Facebook to report revenue of $26.1 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $1.9 billion (7.4 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $5.2 billion in the latest quarter, which translates into a Gross Margin of 81.4 percent of revenue. Since it was lower than the 83.4 percent Gross Margin achieved in the year-earlier quarter, it's a sign that Facebook sold its products and services at less profitable prices relative to production costs. I was expecting the Gross Margin to be 82.0 percent in the December 2020 quarter, and Facebook missed that prediction by 0.6 percent.

Facebook spent $5.2 billion on Research and Development in the latest quarter, up from $3.9 billion one year ago. I had estimated that R&D expenses would be $5.6 billion.  R&D was 18.6 percent of Revenue.

Sales, General, and Administrative expenses totaled $4.9 billion in the December 2020 quarter, up 0.5 percent from one year ago.  SG&A expenses decreased from 23.0 percent to 17.4 percent of quarterly revenue, which shows Facebook spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 21.5 percent of revenue, and the actual percentage turned out to be lower than the prediction.

Facebook's Operating Income was $12.8 billion in the quarter, up 44.2 percent from the year-earlier period.  Operating Income exceeded my $10.2 billion estimate by $2.6 billion.

Interest and other non-operating items summed to a net  income of $280 million.  My estimate for non-operating items was $125 million.

The effective income tax rate fell by 5.8 percent to 14.1 percent, which had a positive effect on net income.  I expected the tax rate to be 16.0 percent.

Net income attributable to Facebook was $11.2 billion, $3.88 per share in the quarter ending December 2020.  The figures for the year-earlier quarter were $7.3 billion, $2.56/share. My earnings estimate for  the latest quarter was $8.7 billion ($3.00/share), so Facebook earned $0.88 per share more than I had predicted.

In summary, the figures in the reported results that were better than expected, worse than expected, and about the same as what I had expected are listed below:

      –Better than expected:  Revenue growth + R&D + SG&A + Interest income + Income tax rate 

      –Worse than expected:  Gross Margin 

      –Near expectations:

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #facebook    #fb    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

PSX: Earnings Report for the Quarter Ending December 31, 2020

Phillips 66 reported before the market opened on January 29, 2021, it lost $1.23 per diluted share in the quarter that ended on December 31, 2020, down from earnings of $1.64 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted earnings, a non-GAAP figure, fell to ($1.15) per share from $1.54 one year earlier. The principal exclusions contributing to the $0.08 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Impairments [$0.22 per share], inventory adjustments [($0.06) per share], and Tax impacts [($0.12) per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by Phillips to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Phillips's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Phillips 66 is an energy company with refining, midstream, downstream, and chemical operations. An independent for decades, Phillips Petroleum merged with Conoco in 2002 to form the giant ConocoPhillips. Phillips became independent again in 2012 -- this time with the iconic "Phillips 66" brand as the company name -- when it was spun off from ConocoPhillips.  Phillips 66 operates refineries for converting crude oil into gasoline and other fuels; the company's San Francisco refinery is being transformed to process renewable oils, instead of crude oil.  The company's products are sold by a large number of branded gas stations and other outlets.  Through the Phillips 66 Partners master limited partnership, Phillips 66 also owns pipelines and terminals for transporting energy products between processing plants and storage facilities.   The company's chemicals business is a 50 percent share of Chevron Phillips Chemicals Company.

The following table is a simplified version of Phillips's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

VZ: Earnings Report for the Quarter Ending December 31, 2020

Verizon Communications reported before the market opened on January 26, 2021, it earned $1.11 per diluted share in the quarter that ended on December 31, 2020, down 10 percent from earnings of $1.23 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted earnings, a non-GAAP figure, rose 7 percent to $1.21 per share from $1.13 one year earlier, a much better change than the GAAP percentage. The principal exclusions contributing to the $0.10 per share difference in the latest quarter between the GAAP and Non-GAAP earnings were: Severance, pension and benefits charges [$0.08 per share], and Net loss on disposition of business [$0.03 per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by Verizon to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Verizon's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Verizon Communications is a major provider of wired and wireless voice and data communications services to U.S. businesses and consumers. The company took its current form in 2000 when Bell Atlantic merged with GTE.  Verizon's wireless business is second only to AT&T in the U.S., and in September 2020, Verizon announced it would acquire Tracfone, the leading pre-paid and value mobile service provider.  The industry is now transitioning to 5G technology. 

The following table is a simplified version of Verizon's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $34.7 billion, about the same as last year. The Consumer business was responsible for 69 percent of overall revenue, and this unit's revenue percent fell by 1.2 percent compared to the year-earlier result. The Business business contributed 23 percent of revenue, and this unit's revenue was essentially unchanged.

I was expecting Verizon to report revenue of $33.8 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $917.0 million (2.7 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $14.8 billion in the latest quarter, which translates into a Gross Margin of 57.3 percent of revenue. Since it was higher than the 55.1 percent Gross Margin achieved in the year-earlier quarter, it signifies that Verizon sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 60.0 percent in the December 2020 quarter, and Verizon missed that prediction by 2.7 percent.

Sales, General, and Administrative expenses totaled $8.5 billion in the December 2020 quarter, up from $8.2 billion one year ago.  SG&A expenses increased from 23.6 percent to 24.5 percent of quarterly revenue, which shows Verizon spent more per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 23.5 percent of revenue, and the actual percentage turned out to be higher than the prediction.

Verizon's Operating Income was $7.2 billion in the quarter, up 8.1 percent from the year-earlier period.  Operating Income fell short of my $7.7 billion estimate by $554 million.

Interest and other non-operating items summed to a net expense of $927 million.  My estimate for non-operating items was $1434 million.

The effective income tax rate rose to 24.5 percent, which had a negative effect on net income.  I expected the tax rate to be 23.0 percent.

Net income in the quarter attributable to Verizon was $4.6 billion, $1.11 per share.  The figures for the year-earlier quarter were $5.1 billion, $1.23/share. My earnings estimate for Verizon in this quarter was $4.7 billion ($1.14/share).

In summary, Verizon Communications earned in the December 2020 quarter much less than I had expected. The company had better-than-predicted Revenue growth, but the company did worse  than I had anticipated with Gross Margin, Operating Income growth, and the Income tax rate.

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #verizon    #vz    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis

ADP: Earnings Report for the Quarter Ending December 31, 2020

Automatic Data Processing reported before the market opened on January 27, 2021, it earned $1.51 per diluted share in the quarter that ended on December 31, 2020, up 1 percent from earnings of $1.50 in the same 3 months of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

Adjusted net earnings (non-GAAP) were unchanged from one year earlier at $1.52 per share. The exclusions responsible for the $0.01 per share difference in the latest quarter between the GAAP and non-GAAP earnings were: Transformation initiatives [$0.01 per share].  Non-GAAP earnings, by excluding unusual and non-cash items that could obscure the results of a business's principal, ongoing operations, are intended to be cleaner measures of corporate profits.

This post compares the quarterly Income Statement published by ADP to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by ADP's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  ADP provides "human capital management" and human resource outsourcing services, such as payroll, benefits, and personnel management, to numerous firms around the world.  These services are increasingly cloud-based.  In the company's most recent fiscal year, ADP "processed and delivered more than 69 million employee year-end tax statements, and moved more than $2.2 trillion in client funds."

The following table is a simplified version of ADP's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $3.7 billion, 1 percent more than last year. The Employer Services business was responsible for 68 percent of overall revenue, and this unit's revenue percent fell by 1.1 percent compared to the year-earlier result. The PEO Services business contributed 32 percent of revenue, and this unit's revenue increased by 4.5 percent.

I was expecting ADP to report revenue of $3.7 billion for the December 2020 quarter.  The actual amount  fell short of my estimate by $4.3 million (0.1 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $1.8 billion in the latest quarter, which translates into a Gross Margin of 50.0 percent of revenue.  I was expecting the Gross Margin to be 49.0 percent in the December 2020 quarter, and ADP exceeded that prediction by 1.0 percent.

ADP spent $175 million on Research and Development in the latest quarter, up from $169 million one year ago. I had estimated that R&D expenses would be $174 million.  R&D was 4.7 percent of Revenue.

Sales, General, and Administrative expenses totaled $756 million in the December 2020 quarter, up from $754 million one year ago.  SG&A expenses decreased from 20.6 percent to 20.5 percent of quarterly revenue, which shows ADP spent less per dollar of sales on indirect operational costs, such as marketing. I had estimated that SG&A expenses would be 21.0 percent of revenue, and the reported data show that the actual percentage was lower than that prediction.

ADP's Operating Income was $818 million in the quarter, down 0.4 percent from the year-earlier period.  Operating Income exceeded my $762 million estimate by $56 million.

Interest and other non-operating items summed to a net  income of $15 million.  My estimate for non-operating items was $15 million.

The effective income tax rate rose by 0.2 percent to 22.2 percent, which had a negative effect on net income.  I expected the tax rate to be 23.0 percent.

Net income in the quarter attributable to ADP was $648 million, $1.51 per share.  The figures for the year-earlier quarter were $652 million, $1.50/share. My earnings estimate for ADP in this quarter was $598 million ($1.39/share).

In summary, Automatic Data Processing earned in the December 2020 quarter more than  I had expected. The company had better than predicted Gross Margin, Operating Income growth, and Income tax rate.  

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #adp  #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis 

AAPL: Earnings Report for the Quarter Ending December 26, 2020

Apple reported after the market closed on January 27, 2021 it earned $1.68 per diluted share in the quarter that ended on December 26, 2020, up 34 percent from earnings of $1.25 in the equivalent 13 weeks of the previous year. These figures are the earnings determined in accordance with U.S. Generally Accepted Accounting Principles (GAAP). 

This post compares the quarterly Income Statement published by Apple to the estimates I made in a previous “Look Ahead” post.  My estimates were based on publicly available guidance provided by Apple's management to financial analysts, news reports, and trends in the company's historical results.  Unless otherwise mentioned, all reported values mentioned below are GAAP figures.

First, a little background about the company:  Apple became one of the world's most valuable companies by designing and selling stylish, easy-to-use computers, tablets, smartphones, music players, and watches, as well as software and media.  Services for these devices are also a lucrative and growing business for Apple, but selling iPhones is, by far, the company's largest single revenue source. The transition to 5G mobile technology may serve to boost iPhone sales even higher.  Apple is now selling laptops with fast, power-efficient processors it designed, replacing chips made by Intel, and they expectation is that other Apple-designed chips will be included in future products.  Apple's shares split 4-for-1 on 28 August 2020; they had split 7-for-1 just six years earlier.

The following table is a simplified version of Apple's Income Statement for the quarter that ended in December 2020, with company-reported numbers along side my predictions.  Figures from the year-earlier quarter are also provided for comparative purposes.

Revenue in the December 2020 quarter totaled $111.4 billion, 21 percent more than last year's $91.8 billion. The iPhone business was responsible for 59 percent of overall revenue, and this unit's revenue grew by 17.2 percent compared to the year-earlier result. The Services business contributed 14 percent of revenue, and this unit's revenue increased by 24.0 percent. The Mac unit supplied 8 percent of revenue, and this business's revenue rose by 21.2 percent.

I was expecting Apple to report revenue of $97.1 billion for the December 2020 quarter.  The actual amount surpassed my estimate by $14.3 billion (14.8 percent).

The Cost of Revenue (also known as Cost of Goods Sold) was $67.1 billion in the latest quarter, which translates into a Gross Margin of 39.8 percent of revenue. Since it was higher than the 38.4 percent Gross Margin achieved in the year-earlier quarter, it signifies that Apple sold its products and services at more profitable prices relative to production costs. I was expecting the Gross Margin to be 38.2 percent in the December 2020 quarter, and Apple exceeded that prediction by 1.6 percent.

Apple spent $5.2 billion on Research and Development in the latest quarter, up from $4.5 billion one year ago. I had estimated that R&D expenses would be $5.1 billion.  R&D was 4.6 percent of Revenue.

Sales, General, and Administrative expenses totaled $5.6 billion in the December 2020 quarter, up from $5.2 billion one year ago.  SG&A expenses decreased from 5.7 percent to 5.1 percent of quarterly revenue, which shows Apple spent less per dollar of sales on indirect operational costs, such as marketing.  I had estimated that SG&A expenses would be 5.8 percent of revenue, and Apple spent less than that percentage.

Apple's Operating Income was $33.5 billion in the quarter, up 31.2 percent from the year-earlier period.  Operating Income exceeded my $26.3 billion estimate by $7.2 billion.

Interest and other non-operating items summed to a net  income of $45 million.  My estimate was $50.0 million.

The effective income tax rate rose by 0.2 percent to 14.4 percent, which had a negative effect on net income.  I expected the tax rate to be 16.0 percent.

Net income in the quarter attributable to Apple was $28.8 billion, $1.68 per share.  The figures for the year-earlier quarter were $22.2 billion, $1.25/share. My earnings estimate for Apple in this quarter was $22.2 billion ($1.30/share).

In summary, Apple earned in the December 2020 quarter much more than I had expected. The company had better than predicted Revenue growth, Gross Margin, Operating Income growth, and Income tax rate. 

 

This post is not investment advice, and the accuracy of the information, tables, charts, and any commentary presented is not guaranteed.  Readers are encouraged to independently verify all data using information from original sources. The Income Statements discussed in these blog posts have not been audited and may differ in material respects from those published by the subject company.  These differences are intended to facilitate analysis and cross-company comparisons. Complete financial statements with notes can usually be found in the 10-Q and 10-K filings companies submit to the Securities and Exchange Commission (SEC).

 #apple    #aapl    #gauges  #gcfr  #gcfr2 #QtrlyRpt   #nac_financialanalysis