With the heat of earnings season just a few weeks out, many companies are beginning to put dates to their quarterly reports. This week, the world’s most valuable publicly traded company, Apple (NASDAQ:AAPL), scheduled its earnings release.
Set for July 31, the tech giant will face intense scrutiny when it reports its third-quarter results for its fiscal 2018. Shares are up about 12% in the past three months and an impressive 30% over the past 12 months. This has pushed Apple’s price-to-earnings ratio from about 16.3 to 18.1 during this time. Can Apple live up to investors’ rosier outlook for the company’s future?
Ahead of its third-quarter earnings release, here’s a look at some of the important areas investors will want to watch when Apple reports results.
Revenue and earnings per share
As Apple continues to grow in size, investors are always looking for evidence that it can keep growing its business. It’s fair to wonder whether it will be difficult to keep growing when its trailing-12-month revenue and net income have already risen to $247 billion and $53 billion, respectively.
Despite Apple’s already enormous size, its growth has been steadily accelerating since it returned to growth over a year ago. In the most recent quarter, for instance, the iPhone maker’s revenue jumped 16% year over year — up from 13% year-over-year growth in its first quarter of fiscal 2018 and 12% growth in the fourth quarter of last year. Similarly, earnings per share increased 30% in its second quarter of fiscal 2018, 16% in Q1, and 24% in the fourth quarter of fiscal 2017.
For the third quarter, management expects strong growth to continue. The company guided for revenue during the period to be between $51.5 billion and $53.5 billion, representing year-over-year growth of 13.4% to 17.8%. After the recent boost to its share repurchase program, Apple’s momentum could easily drive year-over-year growth in its earnings per share on par with the 30% growth it saw in its second quarter.
While its services and other products segments are growing in importance to the company, the iPhone still figures as the primary influence on its results.
The number to compare against for third-quarter iPhone shipments during the quarter will be 41 million units — what Apple shipped in the year-ago quarter.
But investors probably shouldn’t expect any meaningful growth in this figure. Year-over-year iPhone unit growth has slowed recently, but the company has been able to make up for this trend with higher average selling prices for the important product lineup. Driving this point home, iPhone unit sales increased just 3% year over year in the most recent quarter as iPhone revenue rose 14%.
Investors should look for similar trends from iPhone unit sales and revenue growth in Q3.
Last but not least, revenue guidance. Will management guide for yet another quarter of double-digit year-over-year growth in revenue? Analysts currently expect Apple’s revenue for its fourth quarter of fiscal 2019 to increase about 13% year over year.
Investors who don’t want to miss Apple’s next quarterly update should mark their calendars for July 31. On this day, the tech company will report its financial results shortly after market close, as well as host a conference call to discuss the results at 2:00 p.m. PT.
Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.