“Stifel Nicolaus’s Aaron Rakers this morning reiterates a Buy rating on shares of Apple, and a $150 price target, writing that the company used an ‘extremely well-timed FX hedging program’ in 2015 to hold onto $4.1 billion in revenue and 70 cents per share in net income, by his estimates, that it otherwise would have lost as the U.S. dollar rose against other world currencies,” Tiernan Ray reports for Barron’s.
“Apple, in effect, managed better than some companies the dollar effect that crimped many tech results,” Ray reports. “However, as those hedges roll off, Rakers cautions investors to keep in mind that Apple will see less benefit offsetting currency effects in coming quarters.”
Exiting the September quarter, Apple noted an expectation that at current exchange rates over the course of F2016 the protection from its hedging program will be diminished – we believe most significantly looking into the June and September 2016 quarters. [Emphasis Rakers’s] Exiting F4Q15, Apple’s FX hedging contract asset values totaled $1.442 billion, or representing a consistent decline from the $3.561 billion peak exiting the Dec ‘14 quarter – a trend leaving us to consider a continued decline from the $1.409B and $806M gains recognized during the F3Q15 and F4Q15, respectively. — Stifel Nicolaus analyst Aaron Rakers
Read more in the full article here.
MacDailyNews Take: Apple CFO Luca Maestri, October 27, 2015:
The guidance that we’re providing for the first quarter that 39% to 40% it actually an incredible level of guidance given the foreign exchange headwinds that we’re dealing with. How do we deal with that? We continue to hedge, so our program continues on an ongoing basis and we will continue to provide some level of protection to foreign exchange movement. In some cases we have realign prices particularly when we launch new products. We tend to do that in a number of countries where the foreign exchange moves have been particularly extreme, and so we tend to recover that through pricing. And then finally, of course we are putting in place a number of cost initiatives that would allow us to deal with the foreign exchange situation. So, overall we feel very strong guidance for the first quarter. And beyond the first quarter as you know we’re not guiding and so we’ll see over the course of the year.
[Thanks to MacDailyNews Reader “Arline M.” for the heads up.]