By Craig Bowles
Apple, Inc. (NASDAQ:AAPL) is slated to report 2Q 2014 earnings after the bell on Wednesday, April 23rd. The earnings release is expected at approximately 4:30 p.m. EST with a conference call to follow at 5:00 p.m. that is webcast through Apple Investor Relations. Apple is the world's second-largest information technology company by revenue after Samsung Electronics (OTC:SSNLF), and the world's third-largest mobile phone maker after Samsung and Nokia (NYSE:NOK). Aside from Apple, look to the major US equity index futures, ETF's, component providers, and competitors to move off of the upcoming results.
Outliers & Strategy
- Earnings Per Share: Apple normally reports a "clean" number to compare with. The current Street estimate is $10.19 (range $9.65 to $10.69). (Source: Yahoo! Finance).
- Revenues: Company guidance is for $42 bln to $44 bln. Analysts expect a 0.2% decline y/y to $43.53 bln (range $41.76 bln to $44.50 bln).
- Gross Margin: Company guidance is for 37% to 38%. Analysts expect 37.8% (Source: Zacks Institutional Services).
- iPhone / iPad Shipments: According to Zack's Investment Research, analysts are expecting shipments of 38.1 mln iPhones and 19.9 mln iPads
- 3Q 2014 Revenue Guidance: will compare to analyst consensus of $38.26 bln (range $34.94 bln to $44.08 bln).
- Several ratios have come down relative to the 5-year average, but cash flow remains a constant barometer. Apple's trailing P/E of 13.0 compares to a five-year average of 15.2; Price/Book of 3.6 compares to a five-year average of 4.6; Price/Sales of 2.8 compares to a five-year average of 3.4; Price/Cash Flow of 9.1 compares to a five-year average of 9.0.
- Share buybacks total more than $40 billion over the past twelve months after a recent two-week repurchase of $14 billion. The company has repurchased $26 bln of its currently authorized $50 bln.
- Apple shares have a 1-day average price change on earnings of 5.53%. Options are pricing in an implied move of 3.83%.
- 04/21: A couple of analysts expect misses in Q2 and Q3 due to iPhone's Samsung competition but UBS remains bullish while discussing buybacks, according to a post on Barron's Blogs.
- 04/21: iPhone 6 rumors could be hurting Apple iPhone 5 sales, according to a post by Investors Business Daily.
- 04/14: Employee departures could be a warning sign for Apple, according to a post on Benzinga.com.
- 04/14: Jefferies says Apple is negotiating a $100 iPhone 6 price increase with carriers, according to a post on Benzinga.com.
- 04/11: Wells Fargo discusses Apple's long-term opportunities in what is referred to as a 5 phase evolution, posted on Benzinga.com.
Apple shares have consolidated around the 20-day and 50-day moving averages which remain above the uptrending long-term MA. $510 to $525 was an area of consolidation in October and November, so the stock is probably due to break out of this balance area. The last two months have mostly traded $520 to $540. A positive report potentially retests December's $565 area with 2012's mid-$600s in the back of traders' minds. A negative report has various degrees of support down to the $507 200-day MA and below. (Chart courtesy of StockCharts.com)
Analyst expectations for Apple earnings have come down from $10.91 to $10.19 over the last three months amid a slight revenue decline. Traders appear to be more optimistic, so EPS of around $10.50 might be needed to push the stock above the current balance area. The previous two quarters beat by 30c and 43c but the stock still traded lower. The Street is expected to cast a close eye on revenues, gross margins, iPhone shipments, and the sales forecast for the upcoming period.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.