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Shares of Apple (AAPL - Free Report) were slightly higher in early morning trading Wednesday, just one day before the company is slated to release its fiscal first-quarter earnings report. Apple has hogged headlines for all the wrong reasons lately, so investors will want to see whether the tech behemoth can shake off the negative news with strong results.
There is a growing sense of concern throughout the market that Apple’s special-edition iPhone X is not selling well. In fact, reports emerged earlier this week that the Cupertino, California-based firm is prepared halving its production target for the device in the first three months of the year.
Meanwhile, Apple shares dipped on Tuesday after new reports suggested that the company is being probed by the Justice Department. According to these rumors, U.S. regulators have requested information from Apple employees related to the company’s disclosure that a software update intentionally slowed older iPhone models.
Latest Outlook
Neither of the aforementioned stories necessarily help investors prepare for Thursday’s report, and Apple could very well recover from these reports if it can post better-than-expected holiday season results.
Our current Zacks Consensus Estimates are calling for Apple to report adjusted earnings of $3.82 per share and revenues of $86.29 billion, which would represent year-over-year growth of 13.7% and 10.1%, respectively. But of course, earnings and revenue are just two of the many things investors will be concerned with when Apple reports on Thursday.
Indeed, it is likely that Apple’s post-earnings momentum is inspired by the company’s performance in key business units. To prepare for this, we can turn to our exclusive non-financial metrics consensus estimate file.
The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
First up, our NFM estimates are currently calling for Apple to report total iPhone unit sales of 79.79 million, which would represent a 1.9% gain from the year-ago period. However, our consensus estimates are also calling for total iPhone revenues of $59.31 billion. That results would mark growth of 9.1%, underscoring the higher selling price for the iPhone X.
Investors will also be interested in Apple’s Services unit, which has become one of the company’s fastest-growing categories. The Services segment includes things like iTunes, Apple Music, AppleCare, Apple Pay, and licensing. In the previous quarter, Apple’s Services revenues grew about 34.4% and touched a quarterly record of $8.50.
Based on our latest consensus estimates, we expect Apple to post Services revenues of $8.649 billion, which would represent growth of about 20.6% from the $7.172 billion posted in the year-ago quarter.
Earnings ESP
Investors will also want to anticipate the likelihood that Apple surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
Just one day ahead of its report, Apple is sporting a Zacks Rank #3 (Hold) and an Earnings ESP of 1.02%. That is because the company’s Most Accurate Estimate for earnings sits at $3.86 per share, meaning that the most recent analyst estimates have been higher than the consensus. This improved outlook is a good sign heading into the report.
Price Performance and Surprise History
Another important thing to consider ahead of Apple’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.
As we can see, Apple has a pretty solid earnings surprise history. The company has met or surpassed estimates in six-consecutive quarters and has only missed estimates twice over the past five years. Over the past four quarters, Apple shares have bounced in the immediate wake of its report, although the length of those post-earnings surges has varied.
Apple shares will likely trade in response to anything that company management says about forward-looking expectations and guidance. Another thing to remember is that Apple will be taking a huge one-time charge related to the recent U.S. tax reform bill. This will result in a significant difference between GAAP and non-GAAP results, but the overall impact of tax reform could lead to favorable earnings guidance for the next few quarters.
Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Should You Buy Apple (AAPL) Ahead of Earnings?
Shares of Apple (AAPL - Free Report) were slightly higher in early morning trading Wednesday, just one day before the company is slated to release its fiscal first-quarter earnings report. Apple has hogged headlines for all the wrong reasons lately, so investors will want to see whether the tech behemoth can shake off the negative news with strong results.
There is a growing sense of concern throughout the market that Apple’s special-edition iPhone X is not selling well. In fact, reports emerged earlier this week that the Cupertino, California-based firm is prepared halving its production target for the device in the first three months of the year.
Meanwhile, Apple shares dipped on Tuesday after new reports suggested that the company is being probed by the Justice Department. According to these rumors, U.S. regulators have requested information from Apple employees related to the company’s disclosure that a software update intentionally slowed older iPhone models.
Latest Outlook
Neither of the aforementioned stories necessarily help investors prepare for Thursday’s report, and Apple could very well recover from these reports if it can post better-than-expected holiday season results.
Our current Zacks Consensus Estimates are calling for Apple to report adjusted earnings of $3.82 per share and revenues of $86.29 billion, which would represent year-over-year growth of 13.7% and 10.1%, respectively. But of course, earnings and revenue are just two of the many things investors will be concerned with when Apple reports on Thursday.
Indeed, it is likely that Apple’s post-earnings momentum is inspired by the company’s performance in key business units. To prepare for this, we can turn to our exclusive non-financial metrics consensus estimate file.
The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
First up, our NFM estimates are currently calling for Apple to report total iPhone unit sales of 79.79 million, which would represent a 1.9% gain from the year-ago period. However, our consensus estimates are also calling for total iPhone revenues of $59.31 billion. That results would mark growth of 9.1%, underscoring the higher selling price for the iPhone X.
Investors will also be interested in Apple’s Services unit, which has become one of the company’s fastest-growing categories. The Services segment includes things like iTunes, Apple Music, AppleCare, Apple Pay, and licensing. In the previous quarter, Apple’s Services revenues grew about 34.4% and touched a quarterly record of $8.50.
Based on our latest consensus estimates, we expect Apple to post Services revenues of $8.649 billion, which would represent growth of about 20.6% from the $7.172 billion posted in the year-ago quarter.
Earnings ESP
Investors will also want to anticipate the likelihood that Apple surprises investors with better-than-anticipated earnings results. For this, we turn to our Earnings ESP figure.
Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates. This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.
A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.
Just one day ahead of its report, Apple is sporting a Zacks Rank #3 (Hold) and an Earnings ESP of 1.02%. That is because the company’s Most Accurate Estimate for earnings sits at $3.86 per share, meaning that the most recent analyst estimates have been higher than the consensus. This improved outlook is a good sign heading into the report.
Price Performance and Surprise History
Another important thing to consider ahead of Apple’s report is the company’s history of earnings surprises and the effect that these surprises have had on share prices.
Apple Inc. Price, Consensus and EPS Surprise
Apple Inc. Price, Consensus and EPS Surprise | Apple Inc. Quote
As we can see, Apple has a pretty solid earnings surprise history. The company has met or surpassed estimates in six-consecutive quarters and has only missed estimates twice over the past five years. Over the past four quarters, Apple shares have bounced in the immediate wake of its report, although the length of those post-earnings surges has varied.
Apple shares will likely trade in response to anything that company management says about forward-looking expectations and guidance. Another thing to remember is that Apple will be taking a huge one-time charge related to the recent U.S. tax reform bill. This will result in a significant difference between GAAP and non-GAAP results, but the overall impact of tax reform could lead to favorable earnings guidance for the next few quarters.
Want more analysis from this author? Make sure to follow @Ryan_McQueeneyon Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>