Anticipating Apple’s June-Quarter Earnings
28 JULY 2022 - We should, it seems, assume that Apple is not going to beat last year’s numbers. In a normal year you’d be looking at a tough compare, and this is not a normal year.
Apple 3.0 writes up what Apple’s up against. Quoting that:
Last year's astonishing June quarter growth of 36% in revenue and 100% in EPS is going to be tough to beat -- and nobody I know thinks Apple is going to beat it. No analyst expects more than single-digit revenue growth and all but one analyst (…) expects EPS to shrink.
Tough numbers in normal years, as I say. But this is not a normal year, what with the lockdowns in China that crimped supply in the first half, the ongoing war in Ukraine, and growing economic uncertainty. Apple telegraphed difficulty on the last earnings call, saying it was staring down the barrel of a $4B to $8B hit to revenue, thanks to problems in the supply chain.
The pros followed by Apple 3.0 are looking for revenue to grow 3% y-o-y, iPhone revenue to drop nearly 5% (close to $2B down), iPad revenue to drop 4.5%, Mac revenue to rise 3.5%, and wearables revenue to grow one-and-one-third. The Services category stands to be the shining star. Analysts followed by Apple 3.0 expect that category to pick up the $2B dropped by iPhone. They’re looking for y-o-y revenue growth for Services of 13.5%.
What’s Next?
While numbers for last quarter will be informative, Wall Street is always listening for guidance/color going forward - and it will be listening really hard today. Noting that the June-quarter tends to be Apple’s weakest anyway, a piece from CNBC says:
This year, analysts and investors will be closely watching Apple’s earnings in the face of many new macroeconomic trends, including declining consumer confidence, rising interest rates, and decades-high inflation.
So far, Apple’s sales have remained strong, partially because its customers are a fairly well-off group. But any signs that people are putting off Mac and iPhone purchases because of inflation or recession fears could have implications for the whole economy.
The same CNBC quotes a bunch of notes from analysts that I’ve quoted at you before. They include Deutsche Bank analyst Sidney Ho saying:
We believe the company has managed its supply chain better than it planned a quarter ago, while it continued to gain share in an otherwise difficult quarter for smartphones and PCs…
Canaccord Genuity analyst T. Michael Walkley saying:
We (…) anticipate improving iPad sales in part due to improving supply and believe Apple’s $4 billion to $8 billion supply headwind commentary for the June quarter was more likely at the lower-end of this range…
Stressing what Wall Street watches, Wells Fargo analyst Aaron Rakers is quoted, saying:
We believe outlook/demand commentary will be the key focus as we try to gauge the impact to Apple’s earnings in the event of a slowing consumer/macro environment…
And the piece quotes Morgan Stanley analyst Katy Huberty’s parting shot, saying:
Apple remains a best of breed consumer electronics company able to invest through cycles, and with 60%+ of revenue more staples-like in nature, strong brand loyalty, and continued product/services innovation, we believe it is better insulated relative to peers during a downturn…
Got Time for a Call?
And now, we wait - though not for long. Apple earnings for the June-quarter - the third quarter of fiscal year 2022 - are due out today - Thursday 28 July. Numbers for last quarter will hit Apple’s site after the close of trading at 1:30 Pacific/4:30 Eastern. A bit later - 2PM Pacific/5PM Eastern, Apple’s CEO, its CFO, and a bunch Wall Street worrywarts will do the conference call thing. You can hear that as it happens on Apple’s Investor site. Apple will make it available as a podcast soon after. And - of course - we’ll do a recap here tomorrow.
