Apple Earnings: What To Look For Beyond The Numbers

| About: Apple Inc. (AAPL)

After two successive misses on quarterly earnings, all eyes are on Wednesday's Q1-13 report to see if Apple (NASDAQ:AAPL) can turn it's fortunes around.

Wall Street is expecting the company to report $56 billion in sales, with earnings per share of $14.20. Apple's own forecast for the quarter calls for $52 billion in revenue, and earnings per share of $11.75

Of course, revenue (top line) and earnings (bottom line) are the two big numbers everyone looks at first, but the devil is in the details so here are a few other things investors should be mindful of.

1) iPhones: This will be the first full quarter after the iPhone 5 was released for sale in the US, but customers in China and another 50 countries had to wait until mid December. In addition, supply chain issues hampered inventory for the first half of the quarter. Still, encouraging news from carriers on December iPhone 5 sales along with continued strong iPhone 4 number should result in a solid quarter. I would look for sales of 54 million or better.

2) iPads: Domestically, the iPad mini was released on November 2 but wasn't released in China until just last week, so a full quarter of the new small tablet won't be available. Concerns that the mini would cannibalize sales from the standard iPad have dogged the stock from day one, but company does not break out sales by model, so we won't know how many iPad Mini vs Standard Version 3 or 4 were sold. However, some analysts using supply chain data, estimate that the mini could be as much as 60% of all iPads sales. Look for total iPad sales of 23 million units.

3) Margins: The big story last quarter was the decline in overall margins and guidance to margins of 36% for this quarter based on higher ramp up costs associated with the refresh of most of it's product line. The street is modeling margins of 39% for Q1. However, more important than this quarter's margins are where the company guides going forward. Investors will want to see some assurance from management that margins are stabilizing and moving higher going forward. Look for guidance closer to 40%.

4) Stock Buyback: Back in March, the company had announced a three-year, $10 billion stock buyback. Investors will want to know if CEO Tim Cook and CFO Peter Oppenheimer are following through on that commitment, and if there are plans to expand or accelerate the program. After all, at these prices, if the company is not buying back it's own stock why should others?

5) A Cheaper iPhone: What, if any, plans does the company have for a cheaper iPhone to compete in emerging markets? The iPad Mini was a logical response to market demand for a smaller, less expensive tablet. However a cheaper phone is not needed as older iphone4's and 4S's can fill that void quite nicely without impacting quality and/or margins.

So there you have it. Of course, if the company misses on revenue or earnings, very little else will matter and the stock will continue to be under pressure. However, assuming top and bottom line numbers are met and exceeded, it'll be the details like those listed here that may make a difference on whether the stock can turn itself around and start on an upward trend again.

Disclosure: I am long T, AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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