Earnings season ramps up with Apple
The second big week of third-quarter earnings season kicks into another gear Tuesday when Apple, the maker of the iPhone and the world’s most-valuable company, reports its latest quarterly results after the closing bell.
Apple is one of 169 companies in the benchmark Standard & Poor’s 500 stock index that will report results this week, an earnings season that despite its solid start could still end up being the first quarter of contracting profits since the financial crisis in 2009.
Currently S&P 500 profits are forecast to contract 2.8% in the third quarter, and while still negative that is still better than the 4.8% drop seen at the start of the earnings season.
The list of brand name U.S. companies reporting Tuesday reads like a Who’s Who of America’s best corporations. In addition to Apple (which analysts say will earn $1.88 per share, or nearly 33% better than the same quarter a year ago) on revenue of $50.79 billion, Wall Street will get results from major names in tech (social media darling Twitter and China online giant Alibaba), the automotive industry (Ford Motor), pharmaceuticals (Merck and Pfizer), media (Comcast), transports (United Parcel Service) and biotech (Gilead Sciences).
But Apple is the biggie of the day as the gadget maker has been lagging the performance of other major tech players since the market bottom Aug. 25. Apple is up 11.1% since the August low, but Google parent Alphabet is up 22.5% and online shopping giant Amazon.com is up 30.6%.
Christine Short of earnings-tracker Estimize, says there are three key things to watch in today’s Apple earnings report.
1. iPhone 6s and 6s Plus sales. “Investors will be waiting with great anticipation to hear how sales of the iPhone 6s and 6s Plus are faring,” she told clients in a research note. “Three days after the official launch in late September, Apple sold more than 13 million units in one weekend, a company record.”
2. Growth in China. “Much of the company’s success this year can be attributed to China, but can massive growth in that region continue?” Short says. “Earlier this year Apple received approval from Chinese regulators to sell iPhones. During its fiscal Q2 2015 report back in April, Apple reported that iPhone sales in China outpaced the U.S. for the first time ever. In the latest quarterly report released in July, year-over-year growth in Greater China was up 112%, with nearly 30% of total revenues coming from the region. The latest iPhone models were made available in China on launch day, something that wasn’t true of the iPhone 6/iPhone 6 Plus release.”
3. Product updates. “Investors will also be looking for updates on several of Apple’s other products (Apple Watch, Apple Pay, Apple Music and Apple TV) this quarter that have recently been launched or are in the process of being launched,” Short wrote. “These products are likely going to help Apple reduce its reliance on its iPhone segment which currently dictates around 70% of revenues.”
Wall Street needs the world’s biggest company and widely held stock by professional and individual investors to reassert itself as a market leader for the big rally off of the August lows to continue its momentum.
More than three hours before Tuesday’s opening bell, the S&P 500 was down about 1 points, after a drop of nearly 4 points, or 0.2% on Monday. The S&P 500 has rallied about 11% from its August lows and is up 0.6% for the year.
Source: USA TODAY – Earnings season ramps up with Apple
