Earnings preview: No news is good news?
Scientists might argue that the root cause of Earth’s rotation is angular momentum, but come on: We all know it’s money, plain and simple. We don’t sit down every three months to hear Apple talk about physics, after all.
On Wednesday, Apple CEO Tim Cook will take to the speakerphone to talk about the company’s most recent financial quarter, cleverly dubbed “the second quarter of fiscal year 2014.”
As always, Macworld will be on hand at 2 p.m. PT/5 p.m. ET with live coverage and analysis of the call. But if you just can’t wait, and you want to prep a little, here are a few of the hot topics we expect to get covered during Apple’s announcement and the ensuing melee of financial analyst questions.
Let’s start with the big ones: the financial figures. In his guidance for the second quarter, Apple CFO Peter Oppenheimer estimated the company would bring in revenue between $42 billion and $44 billion, with a gross margin of between 37 and 38 percent. That’s compared to the revenue of $57.6 billion in revenue the company pulled down in the first quarter of this year, and the $43.6 billion it reported in the second quarter of 2013.
Assuming the company hits its results right smack dab in the middle, that suggests it might pull in profits of about $10.63 billion, according to my rough back-of-the-envelope calculations. That would be up over the $9.5 billion it profited in the year-ago quarter.
Analysts, meanwhile, are estimating average earnings per share of around $10.17 on revenues of $43.55 billion, as of this writing. That’ll be down sequentially from the earnings per share of $14.50 in the first quarter, but up slightly over the $10.09 figure the company reported in last year’s second quarter.
The company’s pretty consistently given back a dividend of $3.05 per share over the last several quarters, so expect that trend to continue into this quarter.
Apple’s flagship product had a pretty good quarter to kick off 2014, selling more than 51 million units. As always, expect that number to drop off more than a bit in the second quarter, with no holiday shopping season (or introduction of a new model) to bolster it. In the past, the drop-off has been anywhere from 7 percent to more than 20 percent; for no good reason, I’m ball-parking 12 percent and guessing Apple will sell somewhere in the vicinity of 45 million iPhones. But that’s just between you and me.
If the rumor sites are any indication, iPhone 6 rumors are already starting to ramp up. But Cook and co. aren’t likely to do anything to address them, no matter how prying the analysts get. Expect even oblique questions about whether Apple would ever consider making a larger-screen or cheaper phone to be met with the time-honored Tim Cook Stoney Silence (patent pending).
Like the iPhone, Apple’s tablet had a good holiday quarter; the company moved a very healthy 26 million units. Also like its smartphone sibling, that number will probably decline going into the non-holiday quarter. As long as I’m taking shots in the dark about sales volume, I’m going to estimate that it will be down around 15 percent, at just over 22 million units.
The iPad rumor mill has been quieter than the iPhone, so questions from analysts will likely revolve around whether Cook thinks that iPad growth is slowing, and whether the company is worried about its competitors in the tablet space. If Tim Cook doesn’t take that opportunity to ding rival Samsung for its misleading tablet sales numbers, well, then he isn’t the man I thought him to be.
Mac sales have been pretty steady over the last few years, generally falling between 4 to 5 million units. I wouldn’t expect that to change, given that the only new model to be introduced recently is the Mac Pro—which still isn’t shipping in volume. However, given that the pro desktop is likely to make up only a small portion of the company’s Mac sales anyway, it probably won’t hurt Apple’s bottom line for the quarter.
And speaking of the Mac Pro, this may be one place Cook would be willing to give a little, as the analysts call it, color on the situation. Even after four months, the Pro is still showing delays of at least a month, which may prompt analysts to ask what the hold-up is. Given Cook’s expertise on operations, he may detail a few of the factors that have gone into the slowdown.
All and sundry
While these are the more major topics that might arise during Wednesday’s conference call there are, as ever, a slew of smaller things that could possibly get some attention. One is the Apple TV, which has apparently continued to sell well, if not amazingly. This quarter saw the introduction of a major challenger in the form of Amazon’s Fire TV—analysts might ask Cook how he sees the difference between the two offerings.
There have also been reports that the iTunes Store has been encountering some challenges (keep an eye on the company’s Music and Services break-out figures), and that the iTunes Radio streaming service hasn’t performed up to expectations. Cook might find himself fielding questions about whether Apple will move to compete more directly against streaming rivals like Spotify and Pandora.
And with this past quarter’s launch of Microsoft Office for iPad, there might be an opportunity for Apple to once again boast about its impressive adoption rates in the enterprise sector, and how the addition of Microsoft’s productivity suite will only serve to solidify the standing of Apple’s tablet.
Finally, this quarter will probably mark the last conference-call appearance of Apple’s outgoing CFO, Peter Oppenheimer. Apple announced the veteran executive’s retirement in March, and while he’ll stick around until the fall in an advisory capacity, his duties as CFO will be handed over to the company’s current corporate controller, Luca Maestri, as of June. Maestri already appeared on last quarter’s conference call and will probably show up again on Wednesday before fully assuming the CFO mantle for the third-quarter conference call in July.