Looking Forward To Apple's Earnings

Apr. 4.12 | About: Apple Inc. (AAPL)

In just about three weeks, Apple (AAPL) will release its fiscal second quarter earnings report. According to their investor relations website, the earnings call is scheduled for Tuesday, April 24th. The earnings will probably be released sometime around 4:30 ET that afternoon, with a conference call scheduled for 5.

Now, this isn't going to be my formal Apple earnings preview; that will come out right before the actual report. However, I would like to provide a mini-preview here, and discuss some of the factors to consider with this quarter's report.

Before I get into this quarter, I just want to remind you of last quarter's results. Apple reported revenues of $46.33 billion, and net income of $13.06 billion, which translated into earnings per share of $13.87 (diluted). In terms of products, Apple sold a little more than 37 million iPhones, 15.43 million iPads, 5.2 million Macs, and 15.4 million iPads. The iPod was the only segment that showed a year over year decline, which isn't that surprising.

Now, there are two things I must remind you about that quarter that some may overlook. First, it was a holiday quarter. That does make a difference. The second issue, which I barely ever hear about, although I point it out all the time, was that due to the calendar, that quarter was 14 weeks instead of the usual 13. That might not seem like much, but when you do over $46 billion in revenues, that means an average of about $3.3 billion per week. Had it been a normal 13 week period, Apple probably would have reported about $43 billion in revenues and $13 in earnings per share.

Now, let's look at some projections for this quarter. We know that analysts have raised their estimates quite a bit for this quarter after the huge blowout last quarter. Current estimates call for $35.91 billion in revenues and $9.77 in earnings per share. I expect that by the time earnings day gets here, we'll be over $36 billion for the revenue estimate, and perhaps closer to or even above $10 in EPS. Apple's own provided guidance was $32.5 billion in revenue and $8.50 in EPS. We know that they are usually very conservative with their projections.

Now let's look at last year's second quarter. Revenues were $24.67 billion and earnings per share were $6.40. The company sold 3.76 million Macs, 18.65 million iPhones, 9.02 million iPods, and 4.69 million iPads. That was a record second quarter, and we know that they will definitely top it this year. The Mac number should be up year over year, but we won't come anywhere near the 5.2 million sold in the holiday quarter (4 million this quarter perhaps). We know that the iPad will be the big winner, in terms of percentage gain. I've heard a number of street estimates in the 10-12 million range. The new iPad sold well in the final few weeks of the quarter, but the question is how many bought the older model during the rest of the quarter, knowing a new one was coming? The iPhone will also show great growth, with most estimates over 30 million, mostly in the 30-35 million range. If I had to guess right now, I would probably say 32-33 million. I really don't know what the iPod will do, but the year over year numbers have been down in most recent quarters. Unit sales might be down, but they will still get a nice chunk of revenues from iTunes and such.

Apple will report a great quarter in a couple of weeks. Revenues and earnings per share should jump by more than 50% each. The company is going to sell a ton of iPhones, and the iPad sales will be closely watched. If I had to guess currently, I would say my estimate is for $37 to $38 billion in revenues, and about $10.75 to $11 in earnings per share. That is just a rough estimate. I'll have a more accurate prediction when I crunch the numbers for my formal earnings preview.

So what do you do with the stock? Well, it is still a great long opportunity. The average analyst price target is $666 with the median at $700. We've even seen some analysts lately coming out with $1,000 price targets. It is a great long term prospect. Now, if we get too much of a run up before earnings, say to like $700, you might want to be a little more cautious on the report, given the already huge rally. However, a post-earnings decline would allow investors to get back in at a cheaper price, and I would bet the stock price wouldn't be depressed for long. Just look at the recent attempts to drive the stock down. It just goes higher and higher.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.