Apple shares enjoyed modest gains this morning after a solid earnings report yielding $10.3 billion in cash flow for the quarter. The stock rose $1.50 (1.5%) to $96.22 in early morning trading.

For the fiscal third quarter ending June 28, 2014, Apple posted revenue of $37.4 billion and quarterly net profit of $7.7 billion, or $1.28 per diluted share. That compared to revenue of $35.3 billion and net profit of $6.9 billion, or $1.07 per diluted share, in the year-ago quarter. More importantly, the company's margins are back on the rise: Gross margins climbed to 39.4 percent compared to 36.9 percent in the year-ago quarter.

Apple CEO Tim Cook said that iPhone and Mac sales fueled the growth and resulted in the strongest profit growth in seven quarters. The company returned $8 billion in cash to shareholders through dividends and share repurchases during the June quarter.

The Cupertino, Calif.-based company sold 35.2 million iPhones in the quarter, up 12.7% from a year earlier. International sales accounted for 59% of the quarter's revenue, and much of the growth came from so-called BRIC countries: Brazil, Russia, India, and China.

Sales of the iPad continue to drop, however, falling 9.2%. This was somewhat offset by growth of the Macintosh line. Unit sales in the Mac rose 18% to 4.4 million units. Apple sold $5.44 billion worth of Macs in the quarter, almost as much as the $5.9 billion in iPads. The bigger trends appear to be strengthening Mac sales, healthy iPhone sales, but slowing iPad sales in North American and Europe. Overall, growth is strongest in the emerging markets.

The stock has rebounded strongly and is close to new highs after a series of shareholder-friendly practices Apple implemented last year: In the past year it has raised the dividend, bought back stock, increased margins, and more recently, split the stock. Many of these actions came after pressure from hedge fund manager Carl Icahn to return more cash to shareholders.

These reasons contributed to my adding of Apple to the Rayno Report Model Portfolio at the beginning of the year. Shares are now up about 25% on the year and up nearly 72% from the stock's low in May of 2013, which was about $55 on a split-adjusted basis.

Despite solid sales of iPhones and Macs, investors still look forward to new products and growth. Much of the excitement in investor circles has been around the anticipated launch of the iPhone 6, expected to be announced this fall. It's still not clear whether a new Apple iPhone will include a larger screen size, though the Wall Street Journal reported yesterday that Apple has order multiple screen sizes from suppliers.

(Disclosure: The author owns Apple as well as many stocks in the Rayno Model Portfolio, which can be viewed here.)