Street Finds a Few Worms in Apple

Updated from 7:42 a.m. EDT

Apple's (AAPL Quote) second-quarter earnings topped Wall Street's estimates by 10 cents a share, and the company offered an earnings outlook that was better than expected. But investors weren't impressed, selling off the stock.

Shares of Apple were recently off $2.55, or 6.2%, to $38.48 in early trading Thursday.

Indeed, despite the strong results, analysts on a conference call found a number of items to quibble with. For instance, the company's third-quarter guidance -- while above the Street's estimates -- implies that sales will be flat compared with the second quarter and earnings will decline, several analysts noted. Some also observed that Apple's share count ballooned 13% in the quarter, diluting earnings.

The expanded share count had to do with stock options exercises in the quarter, CFO Peter Oppenheimer explained on the call. In terms of the company's guidance, it reflects Apple's normal seasonality and still would represent a 61% growth rate over the year-ago quarter, he said.

"We're very pleased with the results of our first half of our fiscal year," he said. Apple is looking forward to the second half, he added.

Oppenheimer had a lot to be pleased with in the second quarter, as Apple's earnings were six times greater than they were in the year-ago period. In the just-completed quarter, Apple earned $290 million, or 34 cents a share, which was up from $46 million, or 6 cents a share in the year-ago period.

The company's sales jumped 70% to $3.24 billion.

Those results were well ahead of both analysts' expectations and the company's own guidance.

The consensus on the Street was for 24 cents a share in earnings on $3.21 billion in sales, according to Thomson First Call. Apple predicted in January that it would earn 20 cents a share in the just-completed quarter, on $2.9 billion in sales.

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