Apple Q2 earnings expected to fall 'in line,' analysts cautious about June quarter

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As they do every year at this time, analysts are looking past the concluded quarter and are expressing concern about how Apple may perform later this year mostly due to guesses at iPhone demand. Here's what to expect from Tuesday's earnings release.

Concerns from the supply chain about demand in the next iPhone cycle hit Apple's stock price hard in April. However, analyst consensus predicts that the company will post a March quarter in line with Apple's guidance when it announces quarterly earnings after market close on Tuesday.

Apple's guidance, issued when it announced its last quarterly earnings Feb. 1, showed revenue between $60 billion and $62 billion for the second quarter of the year. Analysts mostly predict a number in that range, but are already shifting the gaze forward to Apple's next quarter.

The analyst view

Analyst Katy Huberty from Morgan Stanley, whose analyst note on April 20 sent Apple's stock tumbling, nevertheless predicted that "we expect Apple to report an in-line March quarter." Huberty predicted that Apple will have sold 52.3 million iPhones in the March quarter, compared to a previous estimate by Morgan Stanley of 53.3 million. Apple sold 50.8 million iPhones in Q2 of 2017.

Analysts surveyed by Bloomberg agreed, with a consensus that Apple would show revenue of $61 billion for the second quarter. Apple posted revenue of $52.9 billion in the second quarter in 2017.

Other numbers from the second fiscal quarter of 2017 included 4.2 million Macs sold and $7.042 billion in revenue from the software/services category, which includes the App Store, Apple Music, Apple Pay, iTunes and AppleCare.

Looking to the future

Huberty predicted a much bigger cut to June quarter estimates of iPhone sales, predicting 34 million sold compared to her previous estimate of 40.5 million based on soft demand and reports from the supply chain. This has been a continuing theme in analyst predictions of the upcoming iPhone cycle throughout the spring.

Eyes Tuesday will be on what guidance number Apple announces for its third quarter.

Other factors

The second quarter is also the first full quarter since the enactment of the 2017 tax reform, raising questions as to whether it will affect Apple's earnings. The Wall Street Journal predicted a "capital return bonanza," which may return some of the $269 billion the company has stashed overseas, and perhaps offset some of the trouble caused by the alleged softening iPhone demand.

Meanwhile, some are asking whether Apple's earnings even matter after all. At Seeking Alpha, Bill Maurer notes that, because of the capital return plan, "this is the one quarterly report a year where the pressure on Apple to report solid business results is the least."

Apple's new sixth generation iPad was released too late to have any impact on the second fiscal quarter.

Once again, Apple finds itself in the unique position in which there are questions about its business model and overall health, despite its status as the most valuable company in the history of the world.

Apple will give the results of its latest quarter, and provide guidance for the quarter ending in June, after markets close on Tuesday. A conference call with analysts and members of the media will follow at 2 p.m. Pacific, 5 p.m. Eastern, and AppleInsider will have full coverage.


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