Apple Earnings Preview: Another Strong Quarter Ahead

Apple [[AAPL]] is expected to once again blow away analyst estimates when they report their fiscal second quarter 2010 results before the market opens on Tuesday, April 20.

 

Investors have come to expect Apple to low-ball their guidance numbers and then easily exceed both their guidance and Wall Street analyst expectations. Last quarter, Apple reported EPS that was 76% higher than the Street was expecting. This quarter should see the same story repeated, although we not expecting quite so substantial of a beat this quarter.  

 

Gartner research recently reported that U.S. PC shipments increased 20% y/y during the first quarter and we expect that Mac sales continue to see momentum. The Apple iPhone continues to be a very hot ticket and we expect y/y growth to nearly double once again. Demand for iPod’s continues to slow, but should be more than offset in coming quarters by iPad sales.

 

In 2009, Apple’s shares gained a phenomenal 147%. After briefly trading below $200 per share in early February this year, Apple’s stock has been climbing steadily higher ever since and is now up over 18% in 2010.

 

On January 25, Apple provided fiscal second quarter revenue guidance of $11.0 – $11.4 billion and diluted earnings per share (EPS) of $2.06 – $2.18. The current Wall Street consensus estimates are for revenues of $12.03 billion and EPS of $2.43. We at EarningsPreviews.com are forecasting even better results with revenue of $12.47 billion and $2.68 EPS.

 

Apple is now trading at 18x consensus 2011 EPS estimates. This is above the relative valuations of their peer group. Apple’s stock still appears to be attractively valued despite the rapid appreciation in their stock price over the last year. Over the last decade, Apple has transformed itself into a cash flow empire with nearly $6 billion in cash generated just last quarter and in coming quarters Apple will also benefit from the newly released iPad.

 

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