Apple Inc (AAPL) Earnings Watch: How Will iPhone 5 Sales Impact Fourth Quarter Results?

on October 28 2013 3:49 PM

After the closing bell on Monday, Apple Inc. (NASDAQ: AAPL) is slated to report fiscal fourth-quarter earnings of $7.93 per share on revenue of $36.8 billion, compared with earnings of $8.67 per share on revenue of $36 billion a year earlier, according to analysts polled by Reuters. In addition, Wall Street expects the tech giant to post sales of 33 million to 36 million iPhones in the quarter that ended in September.

Just last week, Apple unveiled the new iPad Air and iPad Mini, a month after revealing its next-generation iPhone 5s and iPhone 5c at an event in September.

“They’ve already released all their products, or at least that’s what everyone thinks,” said Keith Bliss, senior vice president and director of sales & marketing at Cuttone & Co., Inc. “They’ve already shown us everything. The iPad Air, the iPad Mini, the 5c, the 5s. So we want to hear how those products are doing. So far I think the new iPhones are not doing as well as they had expected. The 5c is actually not as cheap as people think for a mid-range smartphone to come in and the 5s, they’ve had production problems.”

The tech giant issued fiscal third-quarter earnings and revenue in July that beat analysts’ forecasts after strong iPhone sales, yet the company’s fourth-quarter sales guidance fell short of estimates. However, after strong initial sales of its new iPhones, Apple adjusted its fiscal fourth-quarter financial forecast, saying it expected revenue toward the high end of its previous forecast for $34 billion to $37 billion.

“They’ve announced the iPad Minis without having a real launch date, so it’s going to be kind of an odd announcement,” said Bliss. “It’s not based on product launches which they’ve done in the past on their quarterly earnings. It’s going to be all about financials and performance of the company.”

During the quarter ended in June, Apple said net income fell 22 percent to $6.9 billion, or $7.47 per share, compared with $8.8 billion, or $9.32 per share, a year-ago. Revenue rose to $35.3 billion, from $35 billion a year earlier. The results topped Wall Street forecasts for earnings of $7.32 per share on sales of $35.02 billion, according to Reuters.

“When Apple releases a product, they generally have very front loaded sales,” added Bliss. “People are waiting in lines at the stores. They’re killing each other to get these products. So we know pretty quickly how well the new products are going to perform. So the 5c, the 5s have been out there for some time. Again, the 5c was meant to compete against the Android phones in the other developing markets and the rumor is that it’s not doing so well. It’s still not a cheap as other Android phones that you can find in some of the emerging economies, which is going to be the next great frontier for Apple.”

Meanwhile, rival Samsung Electronics posted earnings on Friday that matched estimates as results for its July to September period revealed yet another record quarter as quarterly operating profit climbed 26 percent. However, the company forecast weaker smartphone shipments in the fourth quarter due to competition during the holiday season.

“They’ll [Apple] always have good sales here in the U.S. because they have a loyal client base that will buy anything that they produce,” said Bliss. “Analysts are not too worried about that, but where is the next great pump in top-line revenue going to come from? It’s going to come from new markets and new products.  And we’ve already seen all the new products this year, so it’s going to have to come from new markets.”

On Monday, shares of Apple edged up 0.57 percent to $528.96 in afternoon trading ahead of the company’s earnings release.

“One of the biggest components for an earnings release for me is what is management going to say about the future," Bliss said. "What are top line sales like, and what are they saying for the future? Apple’s biggest quarter is always the fourth-quarter because everybody’s rushing in to buy products for the Christmas season, the holiday season. So what are they going to say about that. Will they surprise us with a new product? Will they come out with something that will compete with Samsung’s watch product?"

Apple will hold its earnings call with shareholders at 5 p.m. Eastern to discuss the company’s fiscal fourth-quarter results.

“I think Tim Cook probably has a couple of things up his sleeve," said Bliss. "They’re marketers first, and financial guys second.”

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