Apple (AAPL -1.92%) is set to report its quarterly earnings on July 22. With Samsung having just delivered a less than stellar preliminary report, citing weakness in the low-end and midrange smartphone market, investors seem polarized on what Apple will bring to the table later this month. Will it tout a beat driven by high-end share gains, or will slowness at that end of the market take its toll on even Apple?

Let's rewind to last quarter's guidance
To prepare for the upcoming earnings report, it's important to understand what the market is expecting. Rewind to the last earnings report and you'll see that Apple guided to the following:

  • Revenue between $36 billion and $38 billion
  • Gross margin between 37% and 38%
  • Other income/expense of $200 million
  • Operating expenses between $4.4 billion and $4.5 billion
  • Tax rate of 26.1%

At the midpoint of this guidance range, Apple is set for $37 billion in sales and roughly $7.11 billion in net income on operating income of approximately $9.43 billion. For reference, this midpoint figure would represent roughly 4.8% year-over-year revenue growth from the same quarter in 2013 and approximately 3% net income growth.

OK, now what?
Interestingly enough, sell-side revenue consensus for the quarter sits at $37.84 billion, which implies that the analyst community in general expects Apple to come in at the high end of guidance. In fact, a closer look at the estimate ranges shows that some analysts expect the company to reach $40.05 billion in sales -- well outside of management's guidance.

This is a bit of a double-edged sword as the stock price is typically predicated on what "consensus" estimates are (i.e., future expectations), and right now those expectations are pretty high (which is why the stock has had an excellent run this year). This means that if Apple does, say, $37.5 billion in sales (well above the midpoint of management's guidance) it could still be viewed as a "disappointment."

That being said, while the current quarter's results are important, investors should really pay attention to guidance for the quarter now under way.

The expectations are still pretty high
For the quarter ended in September, the sell-side expects year-over-year sales growth to accelerate from 7.1% to 8.2%. The number on the top line to beat is $40.53 billion, while the consensus earnings-per-share estimate sits at $1.34.

There's a lot of uncertainty here, as that quarter's numbers will be heavily influenced by the early iPhone 6 shipments. It's not likely that many investors believe the iPhone 6 won't be a hit, but at the same time, potential sales numbers are probably tough to call even for Apple.

It's very possible that Apple gains a ton of high-end smartphone share against the likes of Samsung, but at the same time there is risk -- however small -- that the iPhone 6 ends up not claiming as much of the market as people expect.

Foolish takeaway
When Apple reports its numbers, be sure to not only look at how the company did during the most recent quarter, but also on how Apple's guidance matches up with current sell-side consensus. Apple is a fantastic company and there's little doubt that the iPhone 6 will be a hit, but there is risk that these great expectations are already built into consensus estimates and -- more importantly -- the stock price.