Apple shares surge on sack of goodies for investors; expands buyback, ups dividend, 7:1 stock split

Apple Inc. (NASDAQ:AAPL), the world’s largest technology company, surged in pre-market trading in the wake of posting a 7 percent increase in its fiscal second-quarter profit and selling more iPhones than analysts had predicted. The company also expanded it share buyback program and hiked its dividend.

Shares of the world’s most valuable company rose 8.2 percent to $568.25 at 8:17 a.m. in New York.

Net income improved to $10.2 billion, or $11.6 per diluted share, in the period ended March 29, from $9.5 billion, or $10.09 per diluted share, in the year-earlier period, the Cupertino, California–based company said in a statement late yesterday.

Sales rose 4.7 percent to $45.6 billion from $43.6 billion.

Analysts had projected earnings of $10.17 per share, on sales of $43.5 billion.

IPhone sales increased to 43.7 million, far outpacing analysts’ estimates of 37.7 million. 

Gross margin, a measure of Apple’s profitability, was 39.3 percent, up from 37.5 percent a year ago. 

“We’re very proud of our quarterly results, especially our strong iPhone sales and record revenue from services,” Chief Executive Officer Tim Cook said in the statement. “We’re eagerly looking forward to introducing more new products and services that only Apple could bring to market.”

Apple also announced an increase in its stock-repurchase authorization to $90 billion from $60 billion, a seven-for-one stock split and an 8 percent dividend increase to $3.29 a share. The 7:1 to stock split increases the company’s chances of being included in the price-weighted Dow Jones Industrial Average, as it would cut the shares to the $80 range, a more reasonable level for the Dow. 

During the latest quarter, revenue from “the greater China region” increased 13 percent to $9.3 billion from $8.2 billion a year ago.

iPad sales, however, fell 16 percent–its steepest drop on record. As lower-cost tablets flood the market, the iPad isn’t the growth driver for Apple that it once was.

Apple has been grappling with growth in recent quarters as the iPhone and iPad, which together account for about three-quarters of total revenue, face tougher competition from competitors such as Samsung Electronics Co. (KRX:005930) and other lower-cost device makers using Google Inc. (NASDAQ:GOOGL)’s Android operating system.

Looking forward, Apple forecast current-quarter sales in line with analysts’ projections. Revenue would be between $36 billion and $38 billion, with gross margin at 37 percent to 38 percent, the company said.

Apple has been rumored to be working on a wrist-worn “smartwatch” and an iPhone with a larger screen, but those devices now seem unlikely to appear until the latter half of the year.