(By Mani) Apple, Inc. (NASDAQ:AAPL) is expected to report 33 percent growth in earnings and 30.7 percent rise in sales when it reports quarterly results for the April to June period on July 24.
Wall Street expects the Cupertino, California-based Apple to earn $10.38 a share on revenue of $37.35 billion for the third quarter, according to analysts polled by Thomson Reuters.
Apple sees third quarter earnings of $8.68 a share on revenue of $34 billion. Sequentially, the June quarter would be lower compared to the earlier two quarters, which were considered as strongest in the history of Apple.
"We're a bit lower than consensus as we look for iPhone sales to decline from 35.1mn last quarter to 28mn, resulting in a 22% sequential revenue decline," UBS analyst Steven Milunovich wrote in a note to clients.
iPhone shipments are expected to decline, and the slowdown to continue into the September quarter as consumers are waiting for the next edition of iPhone in the fall or may want to buy them at discounts when the new smartphone is launched. Apple is also expected to launch iPad mini to cater to the lower priced segment of the market.
However, Apple has always been a consistent performer. Out of the past four quarters, Apple's earnings have managed to beat the consensus view thrice and that too with a wide margin between 22.5 percent and 33.60 percent. On the sales front, Apple should continue the trend of generating double-digit revenue growth.
Wall Street has been increasingly optimistic on Apple as their consensus earnings expectations have increased from $9.92 three months ago to the current $10.38 a share. In the last 30 days, six analysts have revised up their profit expectations for Apple, while three have cut down their forecasts.
For its second quarter, Apple's profit surged 94 percent to $11.6 billion or $12.30 per share, topping Street view of $10.06 a share. Net sales for the second quarter surged 59% to $39.19 billion, breezing past the consensus estimate of $36.81 billion. iPhone sales jumped 88 percent to 35.1 million units, and iPad sales surged 151 percent to 11.8 million units. Apple sold 4 million Macintosh computers during the second quarter, an increase of 7 percent from last year.
Investors should be focusing on the company's international sales, especially at emerging markets such as China, which accounted for 20 percent of Apple's revenue in the second quarter. In the last quarter, Asia Pacific sales grew at 114 percent year-on-year, Japan at 91 percent and Europe at 46 percent.
Moreover, China is leading the way, tripling in sales to $8 billion last year and already $12 billion in the first half. Clearly, the top priority for Apple is developing a strong relationship with China Mobile, which has the world's largest wireless network at more than 675 million subscribers. This past May, China Mobile posted total sub growth just shy of 11 percent. Over the same period, the carrier's 3G network doubled and now represents 9.5 percent of its total subscribers.
"We estimate that phone sales through China Mobile could contribute $6.00 of EPS in the first full year," the analyst added.
Shares of Apple have gained 59 percent in the last one year – an achievement considering the weak economic backdrop. Since its second quarter results, shares have increased 9 percent. There was not much of a catalyst to move shares in the past few days; although, a strong quarterly results and the forward outlook could lift the shares.
Apple's profit is estimated to grow 69.4 percent this year and 22 percent, on average, in the next five years. Relatively, profits of the broader S&P 500 index companies are expected to grow 9 percent this year and 11 percent in the next five years.
So, iStock views any weakness in shares as a buying opportunity as multiple catalysts, including iTV, remain for the technology giant.