On Thursday evening, Apple will release its financial report.
Investors are optimistic that the business will meet or above Street predictions when it announces its March quarter results after the close on Thursday.
Analysts, on the other hand, are concerned about the June quarter projection, citing a new round of massive Covid-related shutdowns in China.
Apple (ticker: AAPL) is also expected to announce a new stock repurchase programme and raise its dividend in conjunction with results.
According to FactSet, the Street average for the March quarter is $94 billion in sales, up approximately 5% from a year ago, with earnings of $1.42 per share. Apple CFO Luca Maestri indicated on a conference call to review the December quarter that the March quarter numbers will show “strong year-over-year growth,” albeit at a slower pace than the 11% top line growth in the previous quarter.
While Maestri predicted that supply limitations in the March quarter would alleviate compared to the December quarter, he also pointed out that Apple is up against a difficult year-ago comparison: In the middle of the pandemic, Mac and iPad sales soared, resulting in a 54 percent increase in revenue in the March 2021 quarter.
Currency would also be a two-percentage-point drag on top-line growth, according to him, but this could be overstated. It’s worth noting that several tech businesses’ performance have been impacted this quarter by adverse currency issues.
Similarly, I had earlier warned about the possibility of a foreign exchange hit, and the impact turned out to be even worse than I had anticipated. Apple’s performance could be impacted in a similar way.
The Street forecasts $48.4 billion in iPhone sales in the March quarter, up about 1% from a year ago. Both Macs and iPads are expected to witness year-over-year reductions, with Mac sales of $9.1 billion and iPad sales of $7.2 billion, according to Wall Street. Wearables, including Apple Watch, are expected to generate $8.9 billion in revenue, according to analysts. Analysts predict $19.7 billion in Services revenue for the quarter, up 16.8% from the previous year.
Sales of $86.3 billion are expected for the June quarter, with profits of $1.24 per share, according to Wall Street. Apple stopped offering specific forward guidance at the outset of the year and isn’t likely to resume it this quarter, but given the circumstances in China, there are concerns that the commentary will be more cautious than usual.
Note that Microsoft’s other strong estimate for the June quarter included a forecast for its “more personal computing” sector that was lower than expected. Manufacturing shutdowns in China, according to Microsoft CFO Amy Hood, are expected to disrupt both Microsoft’s Surface and Xbox devices, as well as third-party PCs. Apple, which manufactures several of its goods in China, may be much more vulnerable.
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Apple has hiked its dividend in recent years in conjunction with the March quarter earnings announcement. Evercore ISI analyst Amit Daryanani believes the business would increase the dividend from 22 cents to 7 cents per quarter, implying a new rate of roughly 23.5 cents. He also believes Apple will announce a new stock repurchase plan, estimating a $90 billion authorization.
While he anticipates upside to Street projections for the March quarter, Barclays analyst Tim Long wrote in a research note on Wednesday that June guidance “likely disappoints.” Given the “unpredictability of lockdowns” affecting Apple product manufacturing in China, he expects the business will sound cautious. On Apple shares, he keeps an Equal Weight rating.
Krish Sankar, a Cowen analyst, is more upbeat, maintaining his Outperform rating on the company coming into the quarter, but he shares the same concerns about the prospects. He writes, “We expect pandemic lockdowns in large Chinese cities could pose a risk to June quarter sales.” Events in Eastern Europe, according to Sankar, “may alter consumption tendencies.”
Daryanani of Evercore, who also has an Outperform rating on Apple stock, believes June consensus projections are a touch high. He mentions, for example, the contract manufacturer.
has shut down plants that produce around 20% of all iPhones. However, he is optimistic about the company’s services division, which he believes will result in stronger corporate gross margins over time.