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Despite rising expectations, the consensus for the Q2 Apple earnings estimates will likely turn out to be too low.
Apple Inc. (Nasdaq: AAPL) reports its fiscal Q2 earnings after the market close today (Monday).
As usual, the iPhone will determine the size of the success of Apple's earnings. Apple's flagship product usually generates about 55% of the Cupertino, Calif.-based company's revenue.
Here's what investors can expect from the Apple earnings today:
Apple Earnings Estimates: What's the Forecast?
First, here are all the Apple earnings estimates according to Bloomberg:
- Earnings per share: $2.14 (a 29% over last year's Q2)
- Revenue: $55.96 billion (a 23% increase)
- iPhone units: 58.1 million (a 33% increase)
- iPad units: 13.6 million (a 17% decrease)
- Mac units: 4.7 million (a 13.5% increase)
- iPhone ASP: $656
- iPad ASP: $418
- Q3 revenue guidance : $46.93 billion
Apple Earnings Estimates: What Will AAPL Stock Do?
The company's outsized performance has resulted in a 123% increase in stock over the past two years and a 59% gain in the past 12 months. In the first quarter of 2015, Apple stock rose 12.73% while the Standard & Poor's 500 index was essentially flat. The median one-year price target has risen dramatically over the past year, from about $85 to $142. AAPL stock rose to $133.74, up $2.46 (1.89%) in mid-day trading today. A big earnings beat will push Apple stock close to that one-year target.
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Apple Earnings Estimates: Why Such a Big Quarter for the iPhone?
Apple introduces new models of the iPhone in September to exploit the heightened demand of the December holidays. But that has meant a steady decline in iPhone sales the following quarters. But the iPhone 6 and iPhone 6 Plus, with their larger screen sizes, have enjoyed extraordinary demand. The bigger screen size has been a hit in just about every major market. But the iPhone 6 has done particularly well in China. And given an extra boost from the Chinese New Year holiday, which fell on Feb. 19-20, the iPhone 6 won't see as much of a decline in Q2 as most previous iPhone models. In fact, research by Kantar Worldpanel ComTech said that iPhone market share in China reached an all-time high of 27.6% at the end of February, deep in the middle of the quarter. The surge was enough to unseat Chinese upstart Xiaomi Inc. as that country's no. 1 smartphone vendor.
Apple Earnings Estimates: Will We See a Dividend Increase?
The odds are very high that Apple not only will announce an increase to the Apple dividend, but will raise it by at least 10%. Here's why. Apple has raised its dividend as part of its Q2 earnings in each of the past two years. And with a modest yield of just 1.5%, as well as a payout ratio of 25%, the company can afford a substantial raise. To get the Apple dividend to the Standard & Poor's 500 average of 32%, it needs to go up by $0.05 a share to $0.52 – a 10.64% increase. If the company goes by projected 2015 earnings, it could raise the dividend $0.07 a share, to $0.54. To get to a 2% yield, Apple would need to raise its dividend to $0.65 – a whopping 38% increase. Beyond a dividend increase, Apple also is likely to announce a further expansion of its ongoing stock buyback program.
Apple Earnings Estimates: What About the Apple Watch?
The Watch just went on sale last week, so no sales were made in Q2. But if the early days went as well as most suspect, CEO Tim Cook won't miss the opportunity to offer up some glowing sales figures. Like the late Steve Jobs, Cook likes to brag.
NOTE: I'll be live tweeting the Apple earnings conference call tonight. Follow me on Twitter @DavidGZeiler.
Better than the iPhone: The iPhone has great profit margins. Estimates put the margins on Apple's current crop at about 47%. But the margins on the Apple Watch will make that look puny. Apple has positioned the Watch as luxury jewelry, which has profit margins in the 80% to 90% range. That means the Watch will plump Apple's bottom line more than many people realize…
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.