Apple Inc. May Surprise On Margins In Earnings

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Apple has announced that it will release the earning results from its second fiscal quarter on April 27 after closing bell. The company has scheduled its earnings call for 2 p.m. Pacific (5 p.m. Eastern).


What to expect in Apple’s earnings report

Apple (NASDAQ:AAPL) guided for revenue to be between $52 billion and $55 billion for the quarter. The company projected a gross margin of 38.5% to 39.5%. Also Apple management is expected to make an announcement regarding their capital return plan, possibly about more share repurchases.

RBC Capital Markets analyst Amit Daryanani said he expects Apple (NASDAQ:AAPL) to post revenue of $55.4 billion for the quarter. He’s looking for earnings of $2.14 per share. Further, he expects the company’s gross margin to be at the top of its guidance range at 39.5%.

He cited a number of reasons for why he thinks Apple’s (NASDAQ:AAPL) gross margins will be so strong. He said strong iPhone 6 Plus sales plus better pricing in the company’s supply chain and improved efficiency in yields will benefit gross margins.

For the full year, Daryanani said he expects $227.1 billion in revenue and earnings of $8.70 per share. His full year estimates top the consensus estimate of $226 billion in sales and earnings of $8.63 per share.

Apple price target raised by RBC

Daryanani also said in his report that he bumped up his price target for Apple stock from $140 to $142 per share. He also reiterated his Outperform rating on the stock.

In addition to strong results for Apple’s (NASDAQ:AAPL) second fiscal quarter, he thinks this year’s iPhone 6S will bring even more upside to the company’s results later this year. Usually the S variations of iPhone models bring better gross margins because their design is similar to the previous year’s plain numbered version except with improved internal specs. One of this year’s expected upgrades for the iPhone 6S is the addition of Apple’s Force Touch and Taptic Engine technologies.

As of this writing, shares of Apple (NASDAQ:AAPL) were down 0.86% to $125.28 per share.


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