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Apple Inc. (AAPL), International Business Machines Corp. (IBM) Earnings Preview

Tim_Cook Apple Inc music

Apple Inc. (NASDAQ:AAPL) will report quarterly earnings after the close of trade on Tuesday. The consensus on Wall Street is for earnings per share of $1.79, a 40 percent increase from the same period last year. Sales should come in at around $49.08 billion a year earlier. Besides the headline figures, investors will also pay close attention to iPhone sales and the performance of the company in China.

Tim_Cook Apple Inc music

iPhone is the Driver to Earnings and Sales

During the previous quarter, Apple Inc. (NASDAQ:AAPL) made close to 70 percent of its total revenues from the iPhones. As such, the product is the main key to both earnings and sales. Analysts following the stock, on an average, are projecting 49.5 million iPhone devices for the third quarter, representing a massive 40.4 percent jump from 35.2 million units during the year ago quarter.

 

In addition to the total volume of sales, investors will also focus on Apple average sales price, or ASP. The iPhone 6 and iPhone 6 Plus are selling at prices higher than previous models and the company recorded a $62 y-o-y ASP increase during the March quarter.

Concerns Surrounding China

The last reported quarter saw almost 29 percent of Apple Inc. (NASDAQ:AAPL) total revenue coming from Greater China. Sales growth in the region has also been robust at 71 percent y-o-y, easily outpacing the 27 percent rise in global revenue.

However, the Chinese economy, of late, has been quite unstable, and investors are increasingly concerned about the potential impact on Apple’s performance in the country. The earnings call will probably see a lot of analysts posing questions to management about the current state of the Chinese economy and the outlook in the region.

Watch Out for IBM’s Software Sales

International Business Machines Corp. (NYSE:IBM) is all set to report second-quarter numbers after Monday’s close of trade. Wall Street is by and large mostly cautious ahead of the results, as most hardware companies in the slowing PC segment are trying to reinvent themselves.

The former technology bellwether is forecast to report adjusted earnings of $3.79 per share, down from $4.32 per share in the same period a year ago. That number is below the $4.01 the company projected at the end of the first quarter.

Sales will likely dip 14 percent to $20.9 billion. Investors will closely be following the performance of the software segment. International Business Machines Corp. (NYSE:IBM) has failed to meet its revenue expectations in the last three quarters. However, software sales topped estimates in the first quarter.

Shares of International Business Machines Corp. (NYSE:IBM) have risen 7.5 percent year-to-date, compared to a 1.5 percent increase in the Dow. Analysts at J.P Morgan believe current quarter results should be good enough to extend the recent rally in the stock, and have reaffirmed their “neutral” rating.

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