Apple Earnings: An Early Look

On Tuesday, Apple (NASDAQ: AAPL  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Apple's past success is well-known, with its impressive lineup of popular mobile devices. But what has many investors worried is how the company plans to keep growing in the future. Let's take an early look at what's been happening with Apple over the past quarter and what we're likely to see in its quarterly report.

Stats on Apple

Analyst EPS Estimate

$10.07

Change From Year-Ago EPS

(18%)

Revenue Estimate

$42.49 billion

Change From Year-Ago Revenue

8.4%

Earnings Beats in Past 4 Quarters

2

Source: S&P Capital IQ.

Will Apple pull out of its tailspin?
Analysts have slashed their earnings calls on Apple in recent months, cutting more than $1.75 per share off their calls for the just-ended quarter and more than $4.50 per share from their full-year 2013 consensus. The stock has plunged in suit, having fallen almost 20% just since mid-January.

The big debate over Apple essentially boils down to one argument: whether its past performance has any bearing on its future results. After the death of Steve Jobs, many investors have worried that Apple's best days are behind it, as the company has been slow in delivering on promises for brand-new products.

Despite those concerns, Apple won't stop trying to innovate. Lately, attention has swirled around the prospects for a lower-priced iPhone as well as an iWatch and its ongoing efforts on an Apple TV product. A low-cost iPhone would make the product economically viable for a wider range of consumers around the world, but investors fear that it would also force Apple to accept lower margins and potentially dilute its reputation for quality.

Perhaps the biggest thing going for Apple is the fact that expectations are so low. The company's earnings are poised to fall on a year-over-year basis for the first time in a decade, and that has shifted perception of the stock away from its former growth focus to raise questions about whether it's more of a value play. Strong value-based arguments support Apple, but even the discussion of Apple as a value stock is a big change for the tech giant.

Apple's earnings report will have a huge range of metrics that investors will pore over, including its new framework for providing future guidance. But the most important thing for Apple to resolve right now is how it plans to deal with its big cash balance. With activist investors having raised the issue repeatedly, it's becoming a distraction that Apple needs to answer once and for all. If that brings shareholders a bigger dividend, share buybacks, or some more novel reorganization of the company's capital structure, then Apple could finally see its stock hit bottom.

Read more about the debate that's raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Click here to add Apple to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On April 21, 2013, at 10:41 AM, Jjkiam wrote:

    Funny that now the effect of a major allocation of Apple's cash equivalents has also now been lowered to simply putting in a bottom for the stock instead of catalysing a major uptrend. This is a great example of how Apple's lack of effort to support it's stock and company perception in the market has unnecessarily destroyed shareholder value thru management incompetence. It is really hard to fathom how the CEO of a major global enterprise could be this indecisive for more than 8 months and running before taking at least meaningful action to create a more positive narrative on the company. History will look back on the Tim Cook era ( very soon to end) and say the same thing as his only public comment to shareholders about the issue " I don't like it"

  • Report this Comment On April 21, 2013, at 6:30 PM, skleiniv wrote:

    All CEO's have a responsibility to increase & maintain shareholder value. TC has remained mute the entire 8 months! In feb he said they were considering returning cash to SH. Yet, nothing! While the stock was goig down he could have allocated a huge buy back to squeeze shorts & send a message to the public that the share price was a good but, he didn't! He did a refresh on way too many products at one time. By doing so right before the holiday it limited product supply & essentially bogged down the distribution channels. Maybe refreshes are better when doled out over time. Regardless, he hasn't stood up for apple stock while rumors and false articles sent shares lower. How does a CEO allow a companies stock price to lose almost 50% of its price & stay mute? That's simply irresponsible.

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