Apple Inc. (AAPL): China Holds The Key For Monday’s Earnings Call

Apple Inc. (AAPL): China Holds The Key For Monday’s Earnings Call

Apple Inc. (NASDAQ:AAPL) will release its December quarter results on Monday, and expectations are running pretty high. Most are hoping the company received a big boost from China, mainly because Apple made the new iPhone 5S and 5C handsets available there on the same day they were available in the U.S. As a result, Seeking Alpha contributor Bill Maurer says China will play a major role in the company’s report this time around.

Examining Apple’s guidance

Apple Inc. (NASDAQ:AAPL) did provide guidance for the December quarter along with its September quarter results. It projected that revenue would be between $55 billion and $58 billion, while gross margins would be between 36.5% and 37.5%. Apple projected operating expenses to be between $4.4 billion and $4.5 billion and that other income or expenses would be $200 million. It also expected a 26.25% tax rate.

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Maurer thinks Apple Inc. (NASDAQ:AAPL) will deliver a quarterly sales record when it reports on Monday because of the extra availability of its two new iPhones. With previous iPhone launches it took weeks or in some cases even months after the U.S. launch for them to roll out to Chinese consumers. This time around, however, they were available in China on the same day (note that this is for China Unicom and China Telecom, since the China Mobile deal didn’t come until later).

Considering AAPL’s iPhone, iPad sales

On average, analysts are expecting that Apple Inc. (NASDAQ:AAPL) sold 55.3 million iPhones during the December quarter, which would be about a 16% increase from the same quarter a year ago. This most recent launch was the first time Apple released two new handsets at the same time—the iPhone 5S and 5C. The mix of which one of the two sold better than the other will be important because it will have a big impact on Apple’s margins. Early indications suggest that the iPhone 5S has been significantly outselling the 5C, which is good things for the company’s margins.

Apple Inc. (NASDAQ:AAPL) launched two new iPads as well this time around, and once again, the mix of which was more popular will make a big difference on Apple’s bottom line. Maurer notes that demand for the new iPads may have gotten rather pent up since the previous iPad refresh came in early 2012—more than a year before the launch of the two new models. He also notes that supply for the iPad Mini with Retina display was constrained in the beginning, which will probably have an impact on sales, but overall, he expects iPad sales to have been solid. On average, analysts predict that Apple sold 25.09 million iPads during the December quarter, which would be nearly 10% growth compared to the same quarter a year ago.

Maurer estimates Apple’s Q1

After reviewing all the data, including details on potential sales for Apple’s Mac, iPad and other products, Maurer projects that the company will report $57.63 billion in revenue and a little under $12.8 billion in net income. He’s estimating $14.28 per share in earnings and 37.4% gross margins. He believes Apple sold 4.5 million Macs, 9.4 million iPods, 56.4 million iPhones and 25.2 million iPads during its first fiscal quarter of the year.

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