Tuesday, April 19, 2011

Apple Inc. (NASDAQ: AAPL): Q2 Earnings Preview 2011

Apple Inc. (NASDAQ: AAPL) is scheduled to release its fiscal second-quarter earnings after the closing bell on Wednesday, April 20, 2011. Analysts, on average, expect the company to report earnings of $5.35 per share on revenue of $23.27 billion. In the year ago quarter, the company reported earnings of $3.33 per share on revenue of $13.50 billion.

Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Apple has beaten estimates for 31 straight quarters.

In the preceding fiscal first-quarter, the Cupertino, California-based company's net income was  $6.00 billion, or $6.43 per share, compared to $3.38 billion or $3.67 per share in the year-ago quarter. Revenue jumped 67% to $20.34 billion from $12.21 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of $4.06 per share on revenue of $18.86 billion. Gross margin for the fourth quarter dropped to 36.9% from 41.8% in the prior year quarter, while operating margin for the quarter declined to 26.8% from 30.1% a year earlier. IPhone sales soared 91% to 14.1 million units. The company sold 4.19 million iPads during the fourth quarter. 

At its last earnings call in January, Apple said that it expects fiscal second-quarter revenue of about $22 billion and earnings of about $4.90 per share. .

Apple continues to make innovative devices which appeal to consumers in a big way. The company is expected to post strong profit and revenues in the latest quarter, benefiting from the sales of its tablet computer iPad as well as the latest version of its wildly popular smartphone, iPhone. Their iPhone sales are nowhere near their maturity and are still in the growth phase. Additionally, enterprise support for iPhone has continually increased.The iPads are just in their infancy. The Mac too is on the move, taking market share from the Windows crowd quarter after quarter.The solid performance of Apple's fast-expanding store base also provides a positive feedback loop in terms of attracting new customers. Apple’s push into ads and TV could become big new sources of growth. 

During the quarter in review Apple introduced  its new iPad 2 tablet device at a media event in San Francisco. The iPad 2 went on sale at Apple’s own retail stores as well as at retail giants Best Buy Inc. (NYSE: BBY) , Target Corp. (NYSE: TGT) and Wal-Mart Stores Inc. (NYSE: WMT) . The new device has a much larger retail footprint than the first iPad, which was sold only at Apple and Best Buy stores. The March quarter results will also include the launch of the iPhone 4 at Verizon Wireless.

Meanwhile, Steve Jobs's medical leave of absence has caused some concern about who will succeed him. Chief Operating Officer Tim Cook has been in charge and is expected to be answering questions tomorrow.

The company's stock currently trades at a forward P/E (fye Sep 25, 2012) of 12.53 and PEG ratio (5 yr expected) of 0.69.  In terms of stock performance, Apple shares have gained nearly 33 percent over the past year.

Full Disclosure: None.
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