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Apple (AAPL) to Report Q4 Earnings: What's in the Offing?
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Apple (AAPL - Free Report) is set to report fourth-quarter fiscal 2019 results on Oct 30.
For the quarter, revenues are projected between $61 billion and $64 billion. The Zacks Consensus Estimate for revenues is pegged at $62.69 billion, indicating a decline of 0.3% from the year-ago quarter’s reported figure.
Moreover, the consensus mark for earnings is currently pegged at $2.83 per share, down by a penny over the past 30 days. The figure indicates a 2.8% decline from that reported in the year-ago quarter.
Notably, the company beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 3%. Apple reported third-quarter fiscal 2019 earnings of $2.18 per share that beat the Zacks Consensus Estimate by 8 cents but declined 6.8% year over year.
Apple’s fortunes are tied to iPhone, which is by far its biggest revenue contributor. The device accounted for 48.3% of net sales in the last reported quarter, wherein sales grew 1% year over year to $53.81 billion that beat the consensus mark of $53.31 billion.
Apple’s iPhone unit sales are expected to have been muted due to stiff competition from Chinese handset makers and the ongoing U.S.-China trade tussle. Moreover, per CNBC, Chinese consumers are favoring local brands, particularly Huawei, post the U.S. restriction on the Chinese tech giant.
The trend is supported by Gartner’s latest report, per which, Huawei’s sales grew 31% in the Greater China region in second-quarter 2019. While Huawei’s overall sales grew 16.5%, Apple’s iPhone sales declined 13.8% year over year.
The nationalistic buying trend most likely continued in Greater China in the third quarter of 2019 (Apple’s fiscal fourth quarter), which is expected to have hurt iPhone’s top line.
Further, Apple’s brand value has declined in China. Per Bloomberg, which cited an annual report on China’s top brands, the company has been ranked 24, down from 11 last year and five in 2017.
Notably, Apple and its retailers have lowered iPhone prices in China. The company has also inked partnerships with local banks as well as Alibaba’s division, Ant Financial, to offer interest-free financing for iPhone, per TheStreet.
Although these initiatives are expected to positively impact iPhone unit sales, we believe these might not have been enough to counter stiff competition from Chinese handset makers in the to-be-reported quarter.
The Chinese handset-makers are offering top-quality hardware and innovative features in their devices in the premium smartphone market ($500-$800 price range). The significant price gap between these devices and iPhone is likely to have negatively impacted Apple’s market share.
The Zacks Consensus Estimate for iPhone sales currently stands at $32.20 billion, indicating a 13.4% decline from the year-ago quarter’s reported figure.
Apple Music & App Store to Aid Services
The Services segment has become the new cash cow for Apple. The increasing popularity of App Store and an expanding subscriber base of Apple Music and Apple Pay are likely to have benefited the top line in fourth-quarter fiscal 2019.
Per the latest data from App Annie, iOS downloads were stable in the third quarter. China, the United States and Japan were the largest markets for iOS downloads.
Non-gaming apps accounted for 35% of consumer spending on iOS compared with 20% on Alphabet’s (GOOGL - Free Report) Google Play. Shopping, Food and Drink, and Health and Fitness were the top categories contributing to the year-over-year growth of downloads in the quarter.
App Store’s growth can be attributed to a strong developer base and the richness of the apps. Moreover, the company’s endeavor to broaden its ecosystem through partnerships with the likes of Samsung (for iTunes) and Amazon (AMZN - Free Report) is a positive for the Services segment.
Further, Apple Music’s availability on Amazon Echo devices and Fire TV is helping it expand footprint and compete better with Spotify (SPOT - Free Report) .
Although Sweden-based Spotify is leading at the moment, Apple Music is catching up fast. The service now has more than 60 million subscribers, which trails Spotify’s 100-million premium subscriber count.
The partnerships with Verizon and American Airlines are also noteworthy. These are expected to have driven the subscriber base expansion.
The consensus mark for Services revenues currently stands at $12.30 billion, implying 23.2% growth from the year-ago quarter’s reported figure.
Key Q4 Development
On Sep 23, Apple confirmed that its newly redesigned Mac Pro will be manufactured in Austin, TX. Notably, the company received tariff exemptions from U.S. trade regulators on certain components related to the product.
On Sep 23, Apple and Oprah Winfrey announced Oprah’s Book Club, an exclusive series to be streamed on Apple TV+. Oprah Winfrey, a popular talk show host and producer, will interview the authors of her book club picks in the show. A new episode will be available every two months.
On Sep 10, Apple unveiled three models of iPhone 11; 10.2-inch, seventh-generation iPad; Apple Pencil; and Apple Watch Series-5. The company also announced that its Apple Arcade, a subscription-based gaming service, will be available with iOS13 from Sep 19 in more than 150 countries. Priced at $4.99 a month, the service starts with a free trial. Moreover, Apple TV+ will be launched on Nov 1 and priced at $4.99 per month with a one-week free trial.
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Apple (AAPL) to Report Q4 Earnings: What's in the Offing?
Apple (AAPL - Free Report) is set to report fourth-quarter fiscal 2019 results on Oct 30.
For the quarter, revenues are projected between $61 billion and $64 billion. The Zacks Consensus Estimate for revenues is pegged at $62.69 billion, indicating a decline of 0.3% from the year-ago quarter’s reported figure.
Moreover, the consensus mark for earnings is currently pegged at $2.83 per share, down by a penny over the past 30 days. The figure indicates a 2.8% decline from that reported in the year-ago quarter.
Notably, the company beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 3%. Apple reported third-quarter fiscal 2019 earnings of $2.18 per share that beat the Zacks Consensus Estimate by 8 cents but declined 6.8% year over year.
Apple’s fortunes are tied to iPhone, which is by far its biggest revenue contributor. The device accounted for 48.3% of net sales in the last reported quarter, wherein sales grew 1% year over year to $53.81 billion that beat the consensus mark of $53.31 billion.
Apple Inc. Price and EPS Surprise
Apple Inc. price-eps-surprise | Apple Inc. Quote
iPhone Sales Likely to Decline
Apple’s iPhone unit sales are expected to have been muted due to stiff competition from Chinese handset makers and the ongoing U.S.-China trade tussle. Moreover, per CNBC, Chinese consumers are favoring local brands, particularly Huawei, post the U.S. restriction on the Chinese tech giant.
The trend is supported by Gartner’s latest report, per which, Huawei’s sales grew 31% in the Greater China region in second-quarter 2019. While Huawei’s overall sales grew 16.5%, Apple’s iPhone sales declined 13.8% year over year.
The nationalistic buying trend most likely continued in Greater China in the third quarter of 2019 (Apple’s fiscal fourth quarter), which is expected to have hurt iPhone’s top line.
Further, Apple’s brand value has declined in China. Per Bloomberg, which cited an annual report on China’s top brands, the company has been ranked 24, down from 11 last year and five in 2017.
Notably, Apple and its retailers have lowered iPhone prices in China. The company has also inked partnerships with local banks as well as Alibaba’s division, Ant Financial, to offer interest-free financing for iPhone, per TheStreet.
Although these initiatives are expected to positively impact iPhone unit sales, we believe these might not have been enough to counter stiff competition from Chinese handset makers in the to-be-reported quarter.
The Chinese handset-makers are offering top-quality hardware and innovative features in their devices in the premium smartphone market ($500-$800 price range). The significant price gap between these devices and iPhone is likely to have negatively impacted Apple’s market share.
The Zacks Consensus Estimate for iPhone sales currently stands at $32.20 billion, indicating a 13.4% decline from the year-ago quarter’s reported figure.
Apple Music & App Store to Aid Services
The Services segment has become the new cash cow for Apple. The increasing popularity of App Store and an expanding subscriber base of Apple Music and Apple Pay are likely to have benefited the top line in fourth-quarter fiscal 2019.
Per the latest data from App Annie, iOS downloads were stable in the third quarter. China, the United States and Japan were the largest markets for iOS downloads.
Non-gaming apps accounted for 35% of consumer spending on iOS compared with 20% on Alphabet’s (GOOGL - Free Report) Google Play. Shopping, Food and Drink, and Health and Fitness were the top categories contributing to the year-over-year growth of downloads in the quarter.
App Store’s growth can be attributed to a strong developer base and the richness of the apps. Moreover, the company’s endeavor to broaden its ecosystem through partnerships with the likes of Samsung (for iTunes) and Amazon (AMZN - Free Report) is a positive for the Services segment.
Further, Apple Music’s availability on Amazon Echo devices and Fire TV is helping it expand footprint and compete better with Spotify (SPOT - Free Report) .
Although Sweden-based Spotify is leading at the moment, Apple Music is catching up fast. The service now has more than 60 million subscribers, which trails Spotify’s 100-million premium subscriber count.
The partnerships with Verizon and American Airlines are also noteworthy. These are expected to have driven the subscriber base expansion.
The consensus mark for Services revenues currently stands at $12.30 billion, implying 23.2% growth from the year-ago quarter’s reported figure.
Key Q4 Development
On Sep 23, Apple confirmed that its newly redesigned Mac Pro will be manufactured in Austin, TX. Notably, the company received tariff exemptions from U.S. trade regulators on certain components related to the product.
On Sep 23, Apple and Oprah Winfrey announced Oprah’s Book Club, an exclusive series to be streamed on Apple TV+. Oprah Winfrey, a popular talk show host and producer, will interview the authors of her book club picks in the show. A new episode will be available every two months.
On Sep 10, Apple unveiled three models of iPhone 11; 10.2-inch, seventh-generation iPad; Apple Pencil; and Apple Watch Series-5. The company also announced that its Apple Arcade, a subscription-based gaming service, will be available with iOS13 from Sep 19 in more than 150 countries. Priced at $4.99 a month, the service starts with a free trial. Moreover, Apple TV+ will be launched on Nov 1 and priced at $4.99 per month with a one-week free trial.
Zacks Rank
Apple currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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