Q1 AAPL earnings will break records when delivered today (Tuesday), led by blockbuster sales of the iPhone 6.
Every indication points to Apple Inc. (Nasdaq: AAPL) walloping expectations when the Cupertino, Calif.-based tech titan reports earnings after market close.
Holiday sales make Apple's Q1 its biggest quarter of the year. So it's almost certain that 2015's Q1 Apple earnings will be the biggest quarter in company history.
In recent weeks, analysts have scrambled to upgrade their forecasts for the Q1 Apple earnings. The consensus earnings per share (EPS) forecast has risen from $2.52 to $2.59 over the past 60 days.
And as estimates have risen, so has Apple stock. Since Jan. 16, AAPL stock is up about 7%. AAPL closed Monday at $113.56.
The only thing that could dampen Apple's results is the stronger U.S. dollar. But Apple can't do much about that.
Overall, the Q1 AAPL earnings will show a company hitting on all cylinders.
Q1 AAPL Earnings: The Overview
The numbers: In addition to EPS of $2.59, analysts expect revenue of $67.5 billion according to Yahoo! Finance. The EPS number represents a 25% increase over the same period a year ago. The revenue number would be a 17% increase year over year. Those growth numbers are pretty darn impressive for one of the largest companies in the world. But Apple is likely to beat them both handily.
The last quarter: In its Q4 earnings, Apple reported earning $1.42 per share, beating the forecast of $1.31. It was a 20% increase year over year. Revenue was $42.1 billion, up 12% from the previous year. Wall Street had forecast revenue of $37.5 billion. The strong quarter was driven by higher-than-expected iPhone sales.
The stock: Apple stock definitely got its mojo back in 2014. AAPL soared 43.45% in 2014, and was up more than 14% in the December quarter alone. The company pays a dividend of $1.88 for a yield of 1.70%. How far AAPL stock advances in 2015 depends on the continued success of the iPhone as well as the impact of the Apple Watch and Apple Pay.
But the Q1 AAPL earnings will set the tone for 2015. Here's what to expect:
The Q1 Apple Earnings: Keys to the Quarter
The iPhone contributes more than half of Apple's earnings and revenue. So in years when the new model is a hit, Apple thrives.
And all the anecdotal evidence suggests the iPhone 6 and iPhone 6 Plus, introduced last September, have been huge hits.
For most of the quarter, Apple literally was selling iPhones as fast as it could build them. Wait times of two to four weeks were typical as Apple struggled to meet surging demand. The company had just about caught up by the end of the quarter.
Other evidence backs this up. For instance:
- Consumer Intelligence Research Partners reported that the iPhone accounted for 50% of all smartphone activations in the December quarter, up from 28% in the September quarter.
- Research firm Counterpoint reported that in November the iPhone grabbed 33% of the smartphone market in South Korea, the home of rival Samsung Electronics (OTCMKTS: SSNLF). Samsung's share slipped from 60% to 46%.
- The Financial Times said that Apple is expected to report for the first time that it sold more iPhones in China than in the United States. Gaining share in China's vast market will not only be reflected in the Q1 AAPL earnings, but for many quarters to come.
All that said, Apple is sure to blow though the consensus analyst estimate of 66.5 million iPhones sold. The number Apple reports will likely exceed 70 million. The size of the beat here will mostly determine how much AAPL beats on EPS and revenue.
Another factor feeding earnings here will be profit margins. Most expect slightly higher iPhone margins in Q1, giving EPS a little extra oomph.
Other Areas to Watch in the Q1 AAPL Earnings
But the iPhone won't be the only good news. Apple's Macintosh computer business has also been quietly growing and snatching market share. Analysts expect Mac sales of about 5.5 million units for the quarter. That's a 14% increase year over year.
While the rest of the PC market has been flat, Mac sales have kept rising. In the September quarter, the Mac's worldwide market share cracked 5% for the first time.
According to IDC, the Mac had growth of 26% in the home market versus 4% for Windows PCs, and 43.8% in the business market versus 4.8% for PCs. This kind of growth should also help the Q1 AAPL earnings numbers, even though the Mac is only about 15% of Apple's total business.
The growth of Apple's iTunes Store sales, including music and apps, is also worth watching. Macquarie Capital projects that profits from this segment will explode from $10.95 billion last year to $19.12 billion in 2018, when it will account for a third of Apple's total profits.
Only the iPad is expected to be weaker. Analysts are looking for a 17% drop from the same period a year ago.
But iPad sales could rebound in 2015 as Apple's partnership with International Business Machines (NYSE: IBM) begins to bear fruit. IBM is making enterprise software for the iPad. And a larger screen "iPad Pro" is rumored for later in the year.
While AAPL stock has climbed in anticipation of this earnings report, don't expect big gains in after-hours trading. Even a major beat will be tempered by guidance for the current quarter. If the company guides below analyst expectations - as many think it will - the stock could actually fall following the AAPL Q1 earnings report.
Apple Stock Outlook 2015: Apple had an impressive year in 2014, but much of what it did set the company up for an even better 2015. Not only will current businesses thrive, but several new ones will feed growth. These four catalysts will take AAPL stock to historic highs in 2015...
Follow me on Twitter @DavidGZeiler.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.