A month has gone by since the last earnings report for Apple Inc. AAPL. Shares have added about 8.6% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Apple Q1 Earnings and Revenues Beat, Increase Y/Y

Apple reported better-than-expected first quarter of fiscal 2017 results. Earnings of $3.36 per share and revenues of $78.4 billion easily topped the respective Zacks Consensus Estimate of $3.22 and $76.9 billion. On a year-over-year basis, both metrics registered growth of 2.4% and 3.3%.

Product Details

The good show was driven by impressive sales of Apple’s latest smartphone model iPhone 7 and 7 Plus. The performance of Apple’s Services business was also impressive.

Total iPhone unit sales came in at about 78.3 million, up 5% year over year. Revenues from iPhone also grew 5% from the year-ago quarter to $54.4 billion (69.4% of total revenue).

Services, which include revenues from Internet Services, App store, Apple Music, AppleCare, Apple Pay, licensing and other services, surged 18% year over year (with extra one week in the quarter) to nearly $7.2 billion. App Store sales in December alone topped $3 billion. Apple said that it expects Services “revenues to be the size of a Fortune 100 company this year.”

Management also noted that Apple Pay reported transaction volume growth of 500%, buoyed by expansion to markets like Spain, Japan, Russia and New Zealand. At present Apple Pay is available in 13 markets.

Apple Mac unit sales were up 1% year over year to approximately 5.4 million, while revenues grew 7% from the prior-year quarter to $7.2 billion.

Coming to iPad, Apple sold 13.1 million units in the quarter, down 19% year over year. Revenues of $5.5 billion were down 22% from the prior year quarter.

Other products, which include revenues from Apple TV, Apple Watch, Beats products, iPod and Apple-branded and third-party accessories, declined 8% year over year to over $4 billion. Again, there were no data available on Apple Watch sales or its latest product launch, AirPods.

Geographical Performance

Demand for Apple’s products improved across most of the geographical regions except greater China. As much as 64% of sales were from the International markets.

Americas (the biggest market for Apple) generated revenues of approximately $32 billion in the quarter, up 9% year over year.

Europe generated nearly $18.5 billion in revenues, up 3% on a year-over-year basis.

Revenues from Japan rose 20% year over year to $5.8 billion while the rest of Asia Pacific generated revenues of $5.8 billion, up 8% year over year. 

Owing to persistent macroeconomic weakness, Apple revenues declined around 12% year over year in the Greater China region to $16.2 billion.

Margins

Gross margin was 38.5%, a decline of 160 basis points (bps) from the year-ago quarter. 

Operating expenses increased 9% year over year to $6.8 billion due to higher research & development expenses as well as selling, general and administrative expenses. As a result, operating margin plunged 210 bps from the year-ago quarter to 29.8%.

Balance Sheet and Cash Flow

Apple’s cash and cash equivalents (and short-term marketable securities) were $60.5 billion at the end of the quarter, compared with $67.2 billion at fiscal 2016-end. Long-term debt was $73.6 billion compared with $75.4 billion at the end of fiscal 2016.

For the quarter, cash generated from operating activities was $27.1 billion.

Apple returned about $15 billion in capital returns this quarter through dividends and share repurchases. Apple also said that it has so far returned $201 billion out of the $250 billion capital returns program announced in April last year.

The company also declared its quarterly dividend of $0.57 per share payable on Feb 16 to shareholders of record as on Feb 13.

Guidance

For the second quarter of fiscal 2017, Apple forecasts revenues in a range of $51.5 billion to $53.5 billion.

Gross margin is expected within 38% to 39%, while operating expenses are projected within $6.5 billion to $6.6 billion. Other income/ (expense) is likely to be $400 million, while tax rate is expected to be 26%.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been three revisions higher for the current quarter compared to five lower. While looking back an additional 30 days, we can see even more upward momentum.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus | Apple Inc. Quote

VGM Scores

At this time, Apple's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregte VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift.  Interestingly, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.

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