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Apple Q2: Analysts Expect Almost No Revenue Or EPS Growth

Apr 23 2014, 4:25am CDT | by

Apple Q2: Analysts Expect Almost No Revenue Or EPS Growth
 
 

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Apple Q2: Analysts Expect Almost No Revenue Or EPS Growth

Sell-side analysts are projecting that Apple’s revenue will be almost flat year over year at $43.53 billion vs. $43.6 billion a year ago and towards the high-end of management’s guidance of $42 to $44 billion when Apple reports results after the close on Wednesday. EPS is expected to increase less than 1% from $10.09 to $10.18 but due to a lower share count operating income should be down about 6% year over year. Gross margin is estimated to decrease slightly from December quarter’s 37.9% to 37.7% and be within guidance of 37% to 38%.

When you use the various guidance inputs Apple gave in January with a share count of 896 million shares (6 million less than the December quarter) the range for EPS guidance is $9.42 to $10.31. If you then assume that the share count could be down by about 28 million since Apple spent $14 billion in late January/early February the high-end of EPS guidance becomes $10.31.

With little surprise expected from the March quarter results investors will be focused on guidance and an update to the company’s dividend and capital return policies. Going into the conference call analysts are expecting June quarter revenue of $37.87 billion (which is down almost $1 billion in the past three weeks) but still up 7% year over year. EPS has also trended down over the past month from $8.60 to $8.46 which would be a 13% increase year over year.

Investors will also be hanging on any management comments about new products but as usual don’t expect anything even close to wet cement.

Andy Hargreaves believes investors have taken into account soft June guidance

Andy Hargreaves at Pacific Crest expects solid iPhone sales will support the March quarter results and June quarter guidance will be in-line with what investors are expecting. For the March quarter he is estimating revenue of $43.9 billion, gross margin of 37.7% and EPS of $10.22.

Hargreaves is expecting Apple to provide June quarter revenue guidance of $36 to $38 billion (last years revenue was $35.3 billion), gross margin of 36.5% to 37.5% and implied EPS of $7.50 to $8.35 (last years EPS was $7.47).

Katy Huberty in-line with March consensus but below June Street estimates

Katy Huberty at Morgan Stanley is projecting March quarter revenue of $43.3 billion, gross margin of 37.9% and EPS of $10.16. She is modeling 38 million iPhones compared to her AlphaWise tracker of 40.6 million, which is down from 42.3 million in the mid-March survey.

She is expecting June quarter guidance to be below consensus with revenue of $35.7 billion, gross margin of 37.7% and EPS of $7.75 driven by 31.5 million iPhones and 16 million iPads.

Brian Marshall is below Street estimates due to consumers waiting for the iPhone 6

Brian Marshall at ISI is expecting March quarter revenue of $42.7 billion and EPS of $9.75, both a decent amount below the Street due to weaker iPhone sales as consumers wait for the iPhone 6. Note that his share count estimate of 896.5 million is only 5 million less than the December quarter even though Apple bought back about 28 million shares in the late January/early February timeframe.

He is also conservative with his June quarter estimates with revenue of $36.6 billion and EPS of $7.85. However he believes investors will give the company a “pass” if iPhone sales are soft in the first half of calendar 2014 believing that the iPhone 6 will be very strong in the second half.

Gene Munster in-line with March consensus and expecting additional $20-$30 billion in capital return

Gene Munster at Piper Jaffray is expecting March quarter results towards the high-end of guidance with $43.6 billion for revenue and $10.09 in EPS. However he believes June quarter revenue guidance will show 5% growth at the high-end vs. the Street’s 7% since he doesn’t expect any new products in the quarter.

Munster believes Apple will increase its share buyback program and dividend with the potential to increase the combined program by 20%-30% ($20 to $30 billion). He is expecting the iPhone 6 to launch in September, an iWatch in the back half of 2014 and he is still hanging onto a 2014 launch for a TV but his conviction is waiving as he is not hearing any credible feedback from the supply chain that it is in the pipeline.

Steve Milunovich above March consensus with $7 billion additional capital return

Steve Milunovich from UBS has March quarter revenue and gross margin coming in at the high-end of guidance at $43.9 billion and 37.9%, respectively. With a share count of 887.3 million, down 14.2 million shares from the December quarter, he expects EPS to come in at $10.35.

He has decreased his June quarter estimates with revenue moving from $38.1 billion to $36.6 billion and EPS falling from $8.69 to $8.20 but raised his gross margin estimate from 37.9% to 38.2%. These were driven by his iPhone estimate falling from 35 million to 32.5 million and iPads from 16 million to 15.5 million.

Milunovich is only looking for a $7 billion increase to Apple’s dividend and buyback program beyond the authorized $24 billion.

Bill Power is slightly lower then consensus for March and a bit more for the June quarter

Bill Power from Baird is projecting March quarter revenue of $43.2 billion, gross margin of 37.8% and EPS of $10.14. For the June quarter he is estimating revenue of $37.1 billion, gross margin to remain constant at 37.8% and EPS of $8.19.

Aaron Rakers lowered March estimates but EPS above consensus

On Monday Aaron Rakers at Stifel lowered his revenue estimate from $43.95 billion to $42.86 billion and cut his EPS from $10.37 to $10.31. He lowered his iPhone, iPad and Mac estimates, which was offset some by decreasing his share count by 28 million vs. 10 million previously. He has lowered his June quarter projection due to the iPhone 6 expected launch in September and a more back-end loaded China Mobile rollout.

Ben Reitzes is a bit below consensus

Ben Reitzes at Barclay’s is expecting revenue of $43.3 billion to be helped by channel fill but offset by some weakness in iPads, Macs and iPods. His EPS estimate of $10.00 has some upside from product mix and a lower share count.

For the June quarter he believes revenue guidance could be a few billion below the Street with his projection coming in at $37.1 billion and EPS of $8.25. He wouldn’t be surprised to see EPS guidance come in the $7.50 to $8.00 range as demand pauses before the iPhone 6. He also expects gross margin guidance to be around 37.0%.

Apple’s shares closed at $531.70 on Tuesday and are down 5% for the year.

The company will be hosting a conference call at 2 pm Pacific time/5 pm Eastern time. Expect the incoming CFO, Luca Maestri, to take a more prominent role in the call. Mark Rogowsky will be following the conference call with a live blog.

You can follow me on Twitter @sandhillinsight. You can find my other Forbes posts here.

 

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