|15:09 EDT||AAPL||Earnings Watch: Apple reports with iPhone sales, capital return in focus|
Apple (AAPL) is set to report second quarter earnings after the market close on Monday, April 27, with a conference call scheduled for 5:00 pm ET. Apple, the world's most valuable company by market capitalization, is the manufacturer of the iPhone and iPad, among other desktop and mobile computing devices. EXPECTATIONS: Analysts are looking for earnings per share of $2.16 on revenue of $56.06B, according to First Call. The consensus range for EPS is $1.89-$2.43 on revenue of $51.37B-$59.46B. Along with its last earnings report, Apple said it sees Q2 revenue of $52B-$55B and a gross margin between 38.5%-39.5%. In a note to investors, Piper Jaffray analyst Gene Munster said he believes Apple will report revenue, excluding foreign exchange impacts, in line with Street estimates of $56B, implying 57M iPhones. Munster added that he believes the Street is currently looking for 42.7M iPhones in the company's June report, 45.1M in September, and 73.4M in December. LAST QUARTER: Apple reported first quarter EPS of $3.06, which topped the consensus estimate for $2.60. First quarter revenue of $74.6B also beat the $67.69B consensus expectation. Apple reported it sold 74.5M iPhones, 21.42M iPads and 5.52M Macs in Q1. Apple reported a Q1 gross margin of 39.9%, versus 37.9% in the same quarter of last year. NEWS: On February 11, Carl Icahn stated that he has gained further confidence in his thesis on the company, increasing the forecasted EPS for FY 2015 in his model from $9.60 to $9.70. Ichan noted then that he believed the market "should value Apple at $216 per share." A few days later, Financial Times reported Apple had been recruiting automotive technology and vehicle design experts who are at work in a confidential Silicon Valley location near the company’s Cupertino campus and The Wall Street Journal said the company was working secretly toward creating an Apple-branded electric vehicle. On March 6, S&P Dow Jones Indices announced Apple had been selected to replace AT&T (T) in the Dow Jones Industrial Average after the close of trading on Wednesday, March 18. On March 9, Apple announced that Apple Watch would be available on Friday, April 24 to customers in Australia, Canada, China, France, Germany, Hong Kong, Japan, the U.K. and the U.S. In addition to unveiling the Watch that day, Apple also announced a lower price tag of $69 for Apple TV, debuted the thinner new edition of its MacBook and Time Warner's (TWX) HBO announced HBO NOW was coming to Apple TV, making an HBO subscription available directly to Apple customers for the first time. ANALYST OPINION: On the day after Apple's last earnings report, a number of analysts hiked their price targets for the stock, with Cantor increasing its price target to what was then a "Street high" $160 from $143. In a note to investors on March 23, Cantor analyst Brian White then raised his price target on Apple to $180 from $160. At $180 per share, the company's total valuation would be about $1 trillion, the analyst stated. The streaming TV offering it will reportedly launch could be a stepping stone into making actual TVs, according to White, who noted that the LCD TV market is worth $100B a year. Additionally, given the 4G expansion in China, as well as the larger iPhones and Apple's relationship with China Mobile (CHL), Apple is better positioned than ever in China, according to the analyst. The reviews of the Apple Watch suggest that the product will be far short of "insanely great," Raymond James analyst Tavis McCourt wrote in a note to investors on April 10. The lukewarm reviews could raise doubts in investors' minds about the company's ability to launch successful new products and iPhone unit sales are likely to drop in fiscal 2016 versus fiscal 2015, McCourt contended. Against this backdrop, Apple's stock is likely to remain range-bound, wrote McCourt, who downgraded the stock to Market Perform from Outperform. Last April, Apple increased its share repurchase to $90B from $60B and increased its dividend by 8% to $11B annually, Piper's Munster has pointed out. This year, the firm believes "the bogey" for investors is a 15% increase to Apple's total reported capital return number, share repurchase plus past dividends, which would imply a $150B headline number, up from the $130B announced last year. Piper, however, estimates the most likely range for Apple's new capital return policy will fall between $170B and $180B. It keeps an Overweight rating on the stock with a $160 price target. This morning, Brean Capital analyst Ananda Baruah initiated shares of Apple with a Buy rating and $160 price target ahead of the company's March quarter report. Baruah told investors that consensus estimates for the iPhone maker are "materially low" though 2017. The analyst sees upside through 2017 from iPhone shipments and favorable gross margin due to greater than expected sales of the more profitable 6 Plus. PRICE ACTION: Shares of Apple advanced 5.65% on the first day of trade following its Q1 report. Over the last three months, shares of Apple are up more than 20%. In afternoon trading ahead of its Q2 report, Apple is up 1% to $131.58 per share.