Expectations are so low it wouldn't take a very big surprise tomorrow for Apple to beat them.
Tim Cook was relatively upbeat on Apple's September quarter earnings call. But 10 days later, hit by China's COVID lockdown, Apple had to issue a rare warning: "We now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated.”
Estimates of iPhone unit sales fell sharply on the news -- from 6 million to 20 million units -- and earnings estimates followed suit. EPS is likely fall 7.6% YOY according to the Street, and by 3.6% according to my panel of congenitally bullish independents. Only Services, Wearables and iPads are expected to show any kind of year-over-year growth. See below...
We’ll find out whose estimates were closest to the mark when Apple reports after the markets close tomorrow. I’ll be monitoring the earnings call and you can too. Click here just before 5 p.m. Eastern (2 p.m. Pacific).
Of course, the market may not see it that way because a miss is a miss, but I suspect Apple’s guidance will be decent to good, not negative.
Here’s what CNBC says are one set
Of expectations, I added the percentage differences:
“Analysts polled by Refinitiv expect Apple to report just over $121 billion in revenue in the December quarter, which would be a slight decline from the company’s $123.9 billion from a year ago.”
“Here’s what Wall Street is expecting, according to Refinitiv consensus estimates:
Rev: $121.19B vs $123.94B, -2.22%
EPS: $1.94/share vs 2.10, -7.62%
iPhone: $68.29B vs $71.63, -4.7%
iPad: $7.76B vs $7.25, +7%
Mac: $9.63B vs 10.82, – 11.0%
WHA: $15.26B vs 14.70, +3.8%
SVCs: $20.67B vs $19.15, +5.9%”
Primo photo editing!
Colorful (and thoughtful) greetings on arriving at the 3.0 doorstep.
Speculative Apple February Q1 earnings headlines:
Apple today announced results that beat lowered consensus estimates on revenue and earnings, but were also barely above (below) the all time record Q1 2022’s tough compare. This is Apple’s 15th straight positive growth quarter since Q1 and Q2 FY2019 (ends the 14 quarter streak of growth). The quarter’s revenue was still the (2nd) highest Q1 and all time quarterly record despite
multiple economic headwinds.
Apple was heavily constrained by iPhone 14 Pro supply problems related to Covid lockdowns at its Foxconn Zhengzhou iPhone factory in the midst of heavy holiday demand for iPhone 14 Pro models. Despite efforts to fully meet 2022 unmet holiday orders, some unfilled orders spilled into Q2. Apple iPhone demand-supply balance was reachieved in mid-January in time for the start of Lunar New Year celebrations. Production at the Foxconn plant has stabilized at a sustainable 80-90% of peak production as worker issues have been addressed by Foxconn and aided by relaxed China Covid lockdown policies. Foxconn says it continues to recruit and bolster worker numbers amid somewhat lessening Covid numbers in China.
Meanwhile, Apple reported good progress in expanding India iPhone 14 production. India demand for iPhone 14 and 13 models has been brisk but not unexpected coinciding with India’s rapid 5G network rollout. Cook said “India iPhone production is meeting all of India’s growing demand plus enough to make a substantial export contribution. We are excited for India’s future and remain on target to open our first Apple Store in Mumbai this quarter. We can’t wait to share the Apple Store experience with everyone there.”
Apple iPhone revenue was modestly short YOY due to supply woes but helped by increased ASP on the popularity of Pro and Pro Max models and model mix. iPhone 14 and 14 Plus models gained some late near Christmas sales. Demand remained robust through the end of the quarter and into Q2.
Wearables, Home and Accessories were (un)surprisingly strong on sales of Apple Watch Ultra and Watch 8, plus AirPods Pro 2. The Ultra in particular was a brisk seller and a hit among adventurous users. For the second straight quarter, two-thirds of customers purchasing an Apple Watch during the quarter were new to the product.
AirTags have also sold well, especially during the chaotic weather affected holiday travel season where scores of travelers tracked their lost or delayed baggage and other items.
The newest Apple TV 4K had a very successful debut, leading to increased hardware and streaming adoption.
iPads again grew YoY as the world’s preferred tablet with increased revenue and marketshare YOY in most regions. Again, like Watch, for the second straight quarter over half of the customers who purchased iPads during the quarter were new to the product.
Although Mac revenue was below last year’s tough compare and product introduction, the decline was less than Apple and analysts had forecast. Again, nearly half of customers buying Macs were new to the product. With Apple’s recent M2, M2 Pro and M2 Max introduction, Mac sales should continue to buck the PC sales contraction trend.
Overall improvement in foreign exchange and reduced selling costs aided gross margin to the upper end of the 42.5-43.5% range while disciplined OPEX kept costs under control. Tellingly, Apple does not plan on any layoffs, Cook reiterating “you can’t save your way to prosperity, we think you invest your way to it.”
Apple also reported spending $24B on buybacks of some 170M shares.
Cook and Maestri offered cautiously optimistic guidance for Q2 quarter due to lessening foreign exchange, resilience in Apple user spending, and continued demand for iPhones, newest Macs, iPads, Watch, AirPods. They believe Services will continue mid to moderate single digit growth due to the ever increasing install base of Apple products. They noted that while some countries are still struggling with combatting inflation issues and slowing demand, Apple sees some improving economic signs by 2nd half 2023.
As usual, both Cook and Maestri skirted questions about new products except to say that advancing Apple silicon to the partner Taiwan Semiconductor’s 3nm process will continue to unlock performance gains with superior power efficiency. Additional innovations in display technology and features are expected in this and next year’s product launches.