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October 21, 2008

Bar Lower for Apple's Quarterly Earnings

Apple reports its September quarter earnings tonight after the market closes. However, the key to the stock price will be the December quarter guidance. Given that Apple guides below consensus most of the time, I think anything close to consensus of $10.57 billion in revenue and $1.65 in EPS will be well received. Obviously, the question is whether consumers will open their pocketbooks for Apple products during the holidays. The company certainly has a complete product lineup if consumers decide to spend. The iPhone appears to be especially well positioned as a holiday gift. A second question is whether Apple's product transitions support demand but at the expense of margins.

Consensus for the September quarter is looking for EPS of $1.11 on revenues of $8.05 billion composed primarily of 2.7 million Macs, and 10.8 million iPods. The financial expectations are above the disappointing guidance apple provided on its last call in July. I think it is noteworthy that iPod sales at this level would be up mid-single digits. I've seen iPhone estimates all over the place ranging from 4 million to 6 million. AT&T analysts are looking for over 2 million iPhone activations so a total shipment figure of twice that amount seems likely given the broad global rollout.

The last thing I would note is that estimates for Apple have been falling. Expectations for the quarter ahead (guidance) are much more subdued than at any time in the last few years. For example, when Apple last reported December quarter consensus was $1.80. Now the street is expecting $1.65.

Posted by Steve Birenberg at October 21, 2008 07:58 AM in AAPL