AAPL Earnings Full of Clues of How Stock Gets to New Highs

Investors needed to sleep on a deceptively boring earnings report, but by this morning the positive news the company shared in its conference call had pushed Apple Inc. (Nasdaq: AAPL) stock up nearly 3% today (Wednesday).

Much of that had to do with the iPhone, the Cupertino, Calif.-based company's most important product and the primary catalyst of Apple stock.

AAPL investors tend to pay close attention to anything having to do with the iPhone, as it contributes more than half of the company's revenue and about 60% of its profits.

While overall iPhone sales were roughly in line with expectations, strength in several markets, especially China, further raised hopes for the iPhone 6, due in September. With its larger and nearly indestructible screen, that product is looking more and more like a monster hit.

Sales of the iPhone in China jumped 48% in the June quarter, twice as fast as the overall growth rate of that market. Apple CEO Tim Cook said that sales to BRIC countries (Brazil, Russia, India, and China), where cheap phones running Google Inc.'s (Nasdaq: GOOG, GOOGL) Android operating system had previously eaten away iPhone market share, were up 55% year over year.

"China has been terrific for Apple … but it's not really just about China," Money Morning Capital Wave Strategist Shah Gilani said on the FOX Business "Varney & Co." program today (see video below). "As Tim Cook said, it's really about all the BRIC countries doing very well."

And the number of iPhones sold, 35.2 million, was a record for the quarter and a 13% increase over the previous year. And as new Apple Chief Financial Officer Luca Maestri pointed out, these strong sales occurred despite the rumors of the forthcoming iPhone 6. In previous years, iPhone sales have declined more sharply as customers wait for the latest model to debut.

Apart from the iPhone, the AAPL earnings report didn't seem particularly bad or particularly impressive.

Better-than-expected gross profit margins helped AAPL beat Wall Street forecasts. Earnings per share was $1.28 in Apple's fiscal third quarter, easily topping expectations of $1.23.

Revenue came in at $37.4 billion, about $600 million below expectations but a record for Apple's June quarter.

What allowed the beat on the bottom line despite that was a nice surprise in Apple's gross margins, which increased to 39.4% from 36.9% from the same quarter last year.

That's why AAPL stock was flat in after-hours trading last night. It was only after Cook's comments to analysts started to spread that Apple stock started to move higher.

And they weren't just reacting to the encouraging iPhone news…

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